Cathie Wood and her ARK Invest firm on Wednesday purchased more than 500,000 shares of DraftKings stock. The sportsbook operator has carved lower this week on rising concerns about prediction market competition. DraftKings on Wednesday received a double downgrade, but analyst sentiment is mixed.
Wood and ARK Invest purchased on Wednesday a total of 511,049 shares of DraftKings stock, worth $19.11 million based on Tuesday's closing price of 37.40.
The firm added 350,315 shares to the flagship Ark Innovation ETF, 103,872 shares to the ARK Next Generation Internet ETF and 58,862 shares to the Ark Fintech Innovation ETF, respectively.
Prediction Markets Prompt Sell-Off
DraftKings and FanDuel parent Flutter Entertainment retreated earlier this week after prediction markets platform Kalshi quietly rolled out parlay-like offerings ahead of NFL Monday Night Football.
Robinhood CEO Vladimir Tenev in a Sept. 29 social media post said that customers transacted more than 4 billion event contracts, including elections and sports contests, with 2 billion of those transactions in Q3 alone. Robinhood first launched sports contracts on its prediction market hub in March via a partnership with Kalshi.
DKNG stock has fallen almost 17% this week through Thursday after the news, while Flutter stock dropped about 10%.
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Analysts Divided On Impact
Northland on Wednesday gave DraftKings a double downgrade to underperform from market perform, citing increased headwinds from prediction markets like Kalshi and Polymarket, The Fly reported. Analyst Greg Gibas found that prediction markets generally offered more favorable odds, based on observations of 40 NFL and college football games. Gibas believes the growth in popularity and increased adoption of prediction markets can disrupt traditional sportsbooks.
Northland cut its price target on DraftKings to 33 from 53.
Oppenheimer on Wednesday also lowered its price target on DKNG stock to 55 from 60, noting unfavorable stand-alone NFL games in September, which heightened discussions about prediction markets. Oppenheimer wrote that it understands the concerns, but believes the prediction market threat is overstated.
DraftKings saw accelerating betting handles and traffic in September, which implies that prediction market volume is being driven by noncore customers and nonregulated states, Oppenheimer said. The firm believes that casual players could eventually seek a better online sportsbook product experience.
Oppenheimer kept an outperform rating on the shares.
Meanwhile, BMO Capital believes the pullback from Kalshi's launch of sports parlays creates a "back-up-the-truck" opportunity. The firm said that DraftKings remains a leading online sports betting platform that is well-positioned to scale up a leading prediction market over the long term. BMO Capital kept its outperform rating and 65 price target on DKNG stock.
Needham analyst Bernard McTernan told IBD that he thinks DraftKings and FanDuel have "much better" products in regulated markets. But Kalshi can still have a "big business" in states like California and Texas where sports betting isn't yet legal.
DraftKings Stock
DKNG shares eased less than 1% Thursday, adding to its losses on the week.
DraftKings on Tuesday fell 11.6% on the prediction market news to drop below its 200-day line. The stock has retreated to mid-June levels, and is now down more than 6% this year.
Flutter eased 1.1% Thursday. Shares ended the session down 10.9% for the week and at their lowest level since mid-June.
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