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QS Research · Michael Burry's Scion Capital analyst template · 2006

DraftKings Inc. (DKNG)

As of 2026-11-02 · 12/15 boxes filled from SEC filings and market data

Conclusion: SHORT

Conviction high · base case -40% · downside -52% · upside -10%

Section 13 uses peer median EV/Sales 1.44x as a downside, not a base; with TTM EBIT -$182.5M and EBITDA only $109.6M, I value on TTM FCF. FCF/share is $650.9M/496.09M = $1.31. A 10x multiple on that cash flow yields $13.12, -40.3% vs $21.98; 8x yields $10.50 (-52.2%) and 15x yields $19.68 (-10.5%). All three scenarios are below the current price, so the stock is a short.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    DraftKings is a digital sports entertainment and gaming company; in FY2025 it generated $6,054.5 million revenue, 93% from Sportsbook and iGaming, with 4.0 million MUPs and $125 ARPMUP. Sportsbook handle reached $53.6 billion at a 7.1% net revenue margin in FY2025. Since FY2022, the business expanded from Sportsbook, iGaming and DFS (94.0% of FY2022 revenue) to add digital lottery courier and prediction markets, including the October 21, 2025 Railbird acquisition. Distribution remains primarily through Apple App Store and Google Play with no revenue share; FY2025 operating income improved to -$15.8 million.

  2. ✓ 2. Competitive advantage

    DraftKings faces significant competition across online gaming, entertainment, and prediction markets, with many substitutes and well-capitalized rivals; the sources do not identify a durable competitive advantage. Revenue grew to $6.05B in FY2025 and operating losses narrowed to -$15.8M, but the company still reported an operating loss and only a small net income of $3.7M. Operating cash flow turned solidly positive ($662.9M FY2025), while licensing and regulation are mandatory entry/operating requirements rather than a demonstrated moat.

  3. ✓ 3. 10-Q takeaways

    Q2 2026 revenue fell 4.6% to $1.44B on lower sports hold, though H1 revenue rose 5.8% to $3.09B. The company swung to an operating and net loss, with Q2 net loss of $67.6M; adjusted EBITDA remained positive but fell to $114.6M. Cost-of-revenue percentage and sales/marketing expense rose sharply. Cash was $983.9M, buybacks continued, no numeric guidance was given, and the risk-factor update added no new specific risks.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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