Stifel lowers Q3 profit forecasts across DraftKings, Flutter, Rush Street

Stifel has reduced its third-quarter profit estimates for several of the largest listed online gambling companies, citing a mix of poor betting results for operators, heavier spending on prediction markets and a cooling online casino sector.

Analysts Jeffrey Stantial and Steven Wieczynski wrote in a research note previewing earnings that adjusted EBITDA at DraftKings, Flutter Entertainment, Rush Street Interactive and Sportradar is likely to come in below Wall Street's consensus figures.

Stifel put US online sports betting handle growth at roughly 10% year over year for the quarter, even though the NFL and college football seasons began about a week later than in 2025. The bank said bettor-friendly outcomes likely pulled down sportsbook hold, eating into some of the gain from higher betting volume.

DraftKings drew the largest single adjustment: Stifel cut its 2026 adjusted EBITDA forecast for the company by $100 million after it signalled in September that it would spend more on prediction markets, a category it had previously pegged at $200 million to $300 million of investment for the year. The new estimate sits 16% below the bottom end of DraftKings' own guidance range.

Chief executive Jason Robins has argued that stronger-than-expected customer acquisition and conversion rates could justify bringing forward spending originally earmarked for 2027. Stifel expects DraftKings to lean on those metrics in its earnings commentary but warned that further outlays risk unsettling investors given how uncertain the long-term economics and legal status of prediction markets remain.

The bank still expects DraftKings to hold its roughly $1 billion core adjusted EBITDA target for 2026 before accounting for that spending, and kept its buy rating while trimming its price target to $32 from $36.

Stifel also projected DraftKings' third-quarter sportsbook net revenue hold at 6.6%, above the Street's 6.4% estimate, helped by growing parlay volumes and reduced promotional spending, alongside signs that its online casino market share is stabilising after a run of declines.

Flutter, the parent of FanDuel, was named Stifel's top pick heading into earnings despite an expected 7% EBITDA miss for the quarter. The bank estimated FanDuel's US sportsbook handle grew 10% year over year, twice the 5% consensus, with growth outpacing the wider market through August and September. Promotional reinvestment across nine states with available data fell 0.7 percentage points year over year, which Stifel said hints at cheaper-than-expected share gains.

The bank cautioned that two months of data do not confirm a turnaround but argued Flutter's shares, trading around a 40% discount to DraftKings on projected 2027 EBITDA, already price in further losses. It kept its buy rating and cut its price target to $125 from $133.

US online casino revenue growth was estimated at 13% year over year for the third quarter, down from 19% in the first quarter and from the 20% to 30% range seen last year, a slowdown Stifel said persisted into September despite easier comparisons and raised doubts about market maturity rather than one-off effects from the football calendar or last year's World Cup.

That trend weighs most heavily on Rush Street Interactive, the BetRivers operator, whose North American revenue growth Stifel expects to slow to 14% from 23% in the prior quarter. The bank forecast a 2% EBITDA miss that could break a run of 17 straight quarters without one, but kept its buy rating, cutting its price target to $30 from $34 after a roughly 40% share-price decline over seven weeks left the stock trading below eight times projected 2028 EBITDA.

Stifel noted that its covered sportsbook and casino stocks are down between roughly 20% and 60% this year, with valuations 35% to 55% below five-year averages, and warned that additional earnings misses could delay any recovery.

The bank flagged possible upside for Sportradar and Genius Sports through their prediction-market tie-ups with Kalshi and Polymarket, pointing to Genius's acquisition of Legend and scope for higher advertising revenue. It kept a buy rating on Sportradar but cut its price target to $17 from $18, and maintained a hold rating on Genius while lowering its target to $7 from $8.50.