Betting News 
DraftKings recently faced a sharp dip in its stock value following an unexpected surcharge announcement, but financial experts believe the volatility is now behind them as investors shift focus to the upcoming NFL season.
Initial Stock Reaction and Recovery
Earlier this month, DraftKings stock plunged nearly 20% after the company announced a new fee on winning bettors, aimed at offsetting high state taxes like those in Illinois. However, the stock has since rebounded, currently trading around $35.46 per share—up 19% from a nine-month low of $29.83. Despite this recovery, DKNG remains flat year-to-date, lagging behind the 18% average growth seen among North American online gaming stocks.
Minimal Financial Impact from Surcharge Incident
According to Barry Jonas of Truist Securities, the financial impact of the brief surcharge saga was negligible. “While they [DraftKings] continue to grow and maintain their position as a market leader, most people will overlook this incident. This is a company known for consistently beating and raising expectations,” said Jonas. He added that while the incident caught the attention of the “Twitter gaming mafia,” the average consumer or investor is unlikely to remember it.
The surcharge, which was intended to begin in January, was designed to mitigate high taxes from states like Illinois, where the tax rate has recently increased to a graduated range of 20% to 40%. However, after FanDuel chose to absorb the tax impact without imposing a surcharge, DraftKings decided to retract the fee, citing customer feedback.
Wall Street’s Influence on DraftKings’ Decision
Jordan Bender of Citizens JMP suggested that DraftKings may have been more concerned with its stock performance and investor sentiment than customer feedback. “It didn’t seem like they fully thought this through and were going to let investors and analysts interpret it during the months before its launch,” Bender commented. He also noted that the decision to scrap the surcharge might have been influenced by concerns about its impact on DraftKings’ stock narrative.
Some analysts believed that DraftKings could have managed the loss of its biggest bettors if it maintained loyalty among more casual bettors. However, others criticized the decision, calling it “economically illiterate.” An analysis by LSR indicated that the surcharge could have added as much as $220 million annually to DraftKings’ bottom line, raising questions about the trade-off between additional revenue and customer loyalty.
Positive Outlook for DraftKings Amid NFL Season
Chad Beynon of Macquarie sees DraftKings in a strong position to outperform its competitors as the NFL betting season approaches. He pointed out that the stock’s flat performance in 2024, coupled with updated second-half guidance, suggests a potential upside for DKNG. Beynon highlighted that DraftKings is “best positioned for near-term upside from favorable NFL game outcomes, higher structural hold, and general online sports betting and iGaming growth momentum.”
Beynon has rated DraftKings as outperform with a $50 target price. Historically, DraftKings stock has performed best in the two months leading up to the NFL season, although it typically drops by an average of 29% four months after the season begins. However, Beynon believes that the current trends, along with an easier comparison period in the fourth quarter, set DraftKings up for a strong finish to the year.
