Susquehanna cuts DraftKings stock price target on higher investment costs

Susquehanna has reduced its price target on DraftKings Inc. (DKNG) shares to $23 from $27 due to increased investment costs in prediction markets. The firm maintained a Positive rating for the company. DraftKings' stock declined 21% after reporting third-quarter results, with the stock price falling from $18.51 to its 52-week low of $18.51, marking a 46% year-to-date decrease.

The investment in prediction markets has more than doubled to $700 million in 2026, with an additional $300 million planned for 2027. This increased spending has negatively impacted the third-quarter and fourth-quarter 2026 estimates. The market volatility is high, with S&P 500 and Nasdaq-100 three-month implied volatility at 91% and 97% percentile ranks, respectively, over the past year.

Despite this, DraftKings remains a major player in prediction markets, ranking second or third in the sector. The company's prediction markets business is gaining share and now competes with Kalshi, which recently valued the exchange at $4.5 billion based on a 0.08 times run-rate trading volume. However, Susquehanna believes the investment in prediction markets is a wise long-term decision, with multiple paths to potential returns.

The stock is currently considered undervalued at its current price level, and subscribers have access to 10 additional ProTips for further insights. Investors can also explore the comprehensive Pro Research Report for DKNG and other US equities. In related news, DraftKings has faced analyst revisions concerning increased promotional spending and profitability concerns.