Analysis of the Impact of DraftKings' Entry into Prediction Markets on Revenue Diversification and Valuation

DraftKings (DKNG) has officially entered the prediction market, aiming to expand its business scope beyond traditional online sports betting [2]. According to a Morgan Stanley report, this initiative is strategically significant in the long term and is expected to achieve revenue diversification. The global prediction market size is approximately $1.5 trillion, providing it with huge growth potential [3].
Morgan Stanley maintains an ‘Overweight’ rating with a target price of $50, and makes financial forecasts for the business: a loss of about $200 million in 2026, revenue contribution of about $125 million in 2027, and moderate profitability in 2028 [2].
As of the analysis date on December 22, 2025, DraftKings stock rose by 1.61% [2]. The company’s Q3 2025 revenue was $1.144 billion, a year-on-year increase of 4% [3]; its 2026 EBITDA is expected to reach $1-1.3 billion [3].
The prediction market is highly competitive, with major competitors including Kalshi, Robinhood, and FanDuel, which has already launched a prediction market app [1]. DraftKings can leverage existing media resources to reduce customer acquisition costs, but still faces competitive pressure in the short term [3].

1. Revenue Diversification and Long-Term Growth
   : The prediction market provides the company with a new revenue source, and the global market size of $1.5 trillion implies long-term growth potential [3].
2. Short-Term Profit Challenges
   : The business will face losses in the initial stage and will not achieve profitability until 2028, with significant short-term profit pressure [2].
3. Dual Risks of Competition and Regulation
   : The rapid entry of competitors like FanDuel intensifies competition [1], while disputes over the legal characterization of sports prediction contracts bring regulatory uncertainty [4].
4. Divergent Institutional Sentiment
   : Morgan Stanley holds a positive attitude, while analysts such as Truist warn of issues like regulatory risks and incremental costs [2][4].

• Opportunities
  : Achieve revenue diversification and reduce reliance on traditional sports betting; the huge global market size offers significant long-term growth potential; leverage existing brand and media resources to lower customer acquisition costs [3].
• Risks
  : High short-term profit uncertainty, with an expected loss of about $200 million in 2026; ongoing regulatory and legal disputes may affect business development; rapid entry of competitors leads to fierce market share competition [1][2][4].

DraftKings’ entry into the prediction market is a long-term strategic decision aimed at seizing growth opportunities in the global prediction market and achieving revenue diversification. Morgan Stanley maintains an ‘Overweight’ rating and a $50 target price, but investors need to pay attention to the development of key factors such as early trading volume, customer acquisition costs, and competitive dynamics [2].