QS Research · Michael Burry's Scion Capital analyst template · 2006
DraftKings Inc. (DKNG)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case 0% · downside -19% · upside +23%
Using section 13's TTM-to-Sep-30-2026 revenue base of $6.41B and today's 1.61x EV/Sales, the base case is $10.33B EV less $1.14B net debt = $9.19B equity / 496.93M shares = about $18.49, or -0.1% from $18.51. Applying the same 1.61x to the FY2027 guidance high of $7.75B gives $22.81 (+23.3%), while annualizing Q3 2026 revenue of $1.3291B gives $14.93 (-19.3%), so the payoff is roughly symmetric and fails the long test. The market is missing neither the cash generation (FCF $324.1M TTM) nor the Predictions cost: FY2026 Adjusted EBITDA guidance was cut to $175-275M on $650-700M of Predictions investment, and Q3 2026 operating loss was $493.1M. I would watch: FY2027 guidance and Predictions traction could re-rate the stock, but at 1.61x sales today there is no deep-value margin of safety and no confirmed short.
Key numbers
- Share price: $18.51
- Market cap: $9.20B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $6.41B
- Price / book: 51.20x
The 15 boxes
- ✓ 1. Long-form business notes
DraftKings primarily monetizes Sportsbook and iGaming hold, with DFS entry-fee spread and newer digital lottery courier/prediction-market fees; FY2025 revenue was $6,054.5M, and Sportsbook plus iGaming were 93% of revenue. FY2025 KPIs were 4.0M MUPs, $125 ARPMUP, $53.6B Sportsbook Handle and 7.1% Sportsbook Net Revenue Margin. From FY2022 to FY2025 revenue rose from $2.24B to $6.05B while operating loss narrowed from $1.51B to $15.8M and operating cash flow went from -$625.5M to $662.9M; the product list also shifted from Marketplace/retail/media/gaming-software adjacencies in the oldest filing to digital lottery courier and prediction markets in the latest.
- ✓ 2. Competitive advantage
DraftKings has scale but no demonstrated economic moat in its numbers: revenue rose every year in the window ($2.24B FY2022 to $6.05B FY2025) while operating income was negative in every year FY2020-FY2025, including -$15.8M in FY2025, and the FY2025 net income of $3.7M sits against a pre-tax of $7.0M versus that operating loss, so profit came from below the operating line. The only durable assets the filings point to are regulatory permissions (gaming licences with gaming taxes as a percentage of revenue, a CFTC-registered introducing broker, and a CFTC-licensed DCM acquired with Railbird on October 21, 2025) plus capital-light cash generation that turned positive only in FY2024-FY2025 ($662.9M operating cash flow against $15.4M capex in FY2025). The 10-K stresses the opposite of brand or switching costs: reliance on casinos, tribes and horse-tracks for market access, on Apple and Google for distribution, and on Wedbush, CME and CDNA for prediction markets.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended Sep 30, 2026) revenue rose 16.2% to $1,329.1M on Sports revenue +31.5% and Sports Net Revenue Margin of 5.6% vs 5.2%, but sales and marketing jumped 68.1% to $605.7M for the prediction markets launch, Super App and FIFA World Cup acquisition, pushing the quarter to a $493.1M operating loss, a $468.7M net loss and negative Adjusted EBITDA of $316.9M. Nine-month figures are revenue $4,418.4M (+8.7%) and Adjusted EBITDA -$34.4M versus +$276.8M a year earlier. Management cut FY2026 EBITDA guidance to $175-275M on a $650-700M Predictions investment while introducing FY2027 revenue guidance of $7.35-7.75B and Adjusted EBITDA of $800M-$1.0B. Cash was $1,100.9M at Sep 30, 2026 while nine-month operating cash flow fell to $63.0M from $342.4M.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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