Jefferies Group reduced its price target for DraftKings to $53 from $60 and has a Buy recommendation on the stock.
This action comes after DraftKings' previous trade at $41.31, and the stock rose 15.7% in the last six months.
Key takeaways
- Jefferies cut DraftKings’ target to $53 due to multi-state tax headwinds through 2026.
- New Jersey, Illinois, Maryland, and Louisiana tax changes contributed to the new prediction.
- DraftKings recently added a 50-cent transaction fee in Illinois, responding to a new per-wager state tax.
Revisions are also primarily attributed to anticipated tax headwinds in several key markets, including New Jersey, Louisiana, Illinois, and Maryland. Jefferies estimates those will produce roughly $25 million in headwinds during 2025's Q3 and Q4. The upcoming Missouri sports betting December launch adds another estimated $10 million drag during Q4.
Jefferies maintained its Q2 2025 estimates unchanged, putting revenue at $1.40 billion and adjusted EBITDA at $212 million. Its estimates align with the consensus estimates of $1.39 billion in revenue and $225 million in adjusted EBITDA.
But its full-year 2025 EBITDA estimate is now $775 million—below DraftKings' own $800–900 million estimate, let alone the $839 million consensus estimate.
In 2026, Jefferies projects $80 million in continued tax pressures and $75 million in launch-related fees for Missouri and Alberta. The firm added a $100 million placeholder for potential prediction market startup costs.
As a result, its 2026 revenue forecast is now $7.45 billion.
DraftKings adds per-bet fee in Illinois
Adding to the strain is a new betting tax. DraftKings announced it will implement a 50-cent transaction fee on every online bet placed through its sportsbook in Illinois, starting Sept. 1. The move directly responds to a new per-wager tax Illinois lawmakers included in the state's fiscal 2025 budget.
The Prairie State will levy a tax of at least 25 cents per online wager in July. The tax escalates to 50 cents per bet once operators surpass 200 million wagers in a calendar year. This structure places a notable onus on high-volume Illinois online sportsbooks like DK to offset operational costs under the revised tax regime.
The sportsbook previously considered imposing a 3-5% surcharge on winning bets in Illinois, New York, Pennsylvania, and Vermont. However, it shelved that plan in 2023 following negative feedback from users and analysts.
MGM downgraded as Strip weakens and capital demands rise
DraftKings isn't the only gaming company feeling the squeeze. Brokerage firm Citizens JMP downgraded MGM Resorts International to "market perform", citing weakening demand on the Las Vegas Strip and intensifying capital expenditure commitments.
Citizens revised its 2025 Las Vegas EBITDAR projection downward by 3% and noted MGM is moving up its planned remodel of the MGM Grand to this fall. The company expects to spend approximately $2.7 billion on capital projects between 2023 and 2025, alongside future outlays for a resort in Japan, potential casino development in New York, and renovations at Aria and the Cosmopolitan.
BetMGM, the U.S. sports betting venture with Entain, remains a salient asset. However, Citizens cautioned MGM's 50% stake creates strategic ambiguity if the operator seeks complete control.
