Key Takeaways
- DraftKings CFO Alan Ellingson bought $350,000 of the company’s stock on Nov. 9, four days after it cut its 2026 outlook to pay for a bigger push into prediction markets.
- At the $18.51 a share he paid, DraftKings traded at about 11x analysts’ 2027 earnings estimate and below its average forward multiple since early 2025.
- Management’s 2027 adjusted EBITDA guidance came in below what analysts expected. A Supreme Court ruling against sports event contracts could also cut into the Predictions revenue DraftKings is spending to build.
- The numbers can support the buy if Predictions spending falls in 2027 as planned, and the fourth-quarter report, expected in February, is the first test.
DraftKings (DKNG) cut its 2026 outlook on Nov. 5. Four days later, its chief financial officer bought $350,000 of the stock.
Alan Ellingson bought 18,908 shares on Nov. 9 at an average of $18.51 apiece, $349,987 in all, according to the Form 4 he filed the same day. The stock closed that day at $18.70, 49% below its 52-week intraday high of $36.98 from Jan. 6.
The Predictions bill nearly tripled
DraftKings has been building a prediction-markets business to take on exchanges like Kalshi that pay no state gaming taxes. On Nov. 5, it said it would invest $650 million to $700 million in Predictions this year, up from the $200 million to $300 million it had planned. Mostly as a result, its 2026 adjusted EBITDA guidance fell to $175 million to $275 million, from $700 million to $900 million. The stock fell 21.3% the next day, closing at $18.51 on Nov. 6.
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Ellingson added 10% to his stake
The purchase lifted Ellingson’s direct holding to 214,692 shares from 195,784, worth about $4.0 million at the price he paid.
In the earnings release, Ellingson said the core business is paying for the push: “Our core business continues to generate significant free cash flow, which we are deploying to fund growth in our Predictions business at attractive payback periods.”
The company as a whole hasn’t produced that cash this year, though. Through the first nine months of 2026, operating cash flow of $63.0 million didn’t cover the $168.9 million DraftKings spent on equipment and internally developed software. Ellingson said on the call that he expects significant excess free cash flow in 2027, even after funding Predictions.
Does $18.51 add up?
Analysts expect normalized EPS to more than double from $0.66 in 2025 to $1.64 in 2027, then reach $2.23 in 2028:
The 2027 estimate has barely moved in three months. But management’s 2027 guidance of $800 million to $1.0 billion of adjusted EBITDA came in below the $1.13 billion analysts expected before the report, so that estimate looks more likely to fall than rise.
Even so, Ellingson paid only about 11 times that estimate. At the Nov. 6 close of $18.51, the same price he paid, the stock traded at about 17x forward earnings. That’s near the bottom of the 16x to 31x range of its quarter-end readings since March 2025, which averaged 23x.
The Street has been cutting its targets over the past year, and on Nov. 9, JPMorgan, UBS and Stifel downgraded the stock to Neutral or Hold:
The consensus target fell to $30.65 as of Nov. 8, from $47.50 a year earlier, and it’s still 64% above the Nov. 9 close.
The numbers back him, if Predictions pays off
The biggest risk is in the courts. Management’s 2027 guidance includes $650 million to $750 million of Predictions revenue. CEO Jason Robins said on the call that his base case is a Supreme Court ruling on sports event contracts around mid-2028. A ruling against those contracts would cut off the sports trading behind much of that revenue.
The numbers can support his buy: at about 11x 2027 estimates, those estimates can slip, and the stock still looks cheap, as long as Predictions spending falls to the $300 million midpoint management guides for 2027. Still, a single insider buy is one person’s bet, and investors who track insider buying look for results to back it up. The fourth-quarter report, expected in February, will be the first chance to see whether that spending is coming down.
So what is DraftKings stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
