Why Michael Burry Is Doubling Down on DraftKings Stock

Well-known investor Michael Burry, who rose to fame after “The Big Short” movie spotlighted his remarkably accurate call on the U.S. housing market collapse, revealed his latest portfolio moves last week. While the legendary investor expanded his short positions tied to artificial intelligence (AI) and semiconductor stocks, one move stood out for a very different reason. He appears to have increased his stake in online sports betting giant DraftKings (DKNG). 

DraftKings has had a rough ride over the past year. 

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The stock has come under intense pressure as the rapid rise of prediction markets has disrupted the company’s traditional sports betting business model. As platforms like Kalshi and Polymarket continue to gain traction, investors have grown increasingly concerned about the competitive threat, sending DraftKings shares tumbling more than 50% from their 52-week high of $48.78, reached in September last year. But despite the market’s skepticism, Burry appears to see an opportunity where others see risk. 

Known for making bold contrarian bets, the famed investor is wagering that future government regulations and tax policies could slow the growth of prediction markets such as Kalshi and Polymarket, giving regulated sportsbook operators like DraftKings room to regain momentum. He reportedly added to his DraftKings position at around $23.40. So, with one of Wall Street’s most closely watched contrarian investors doubling down on the stock, let’s take a closer look at whether DraftKings could be gearing up for a comeback.

About DraftKings Stock

DraftKings is far more than just a sports betting app. The Boston-based company has built a broad digital sports entertainment and gaming ecosystem, with offerings that span daily fantasy sports, regulated online gaming, sports betting, digital media, and event contract trading. Founded in 2012 by Jason Robins, Matt Kalish, and Paul Liberman, DraftKings has grown into the only U.S.-based vertically integrated sports betting operator. The company says its goal is to responsibly create engaging real-money gaming and betting experiences for sports fans.

Today, DraftKings Sportsbook operates mobile and retail sports betting under regulatory approval in 30 U.S. states, Washington, D.C., Puerto Rico, and the Canadian provinces of Alberta and Ontario. Beyond sports betting, the company runs iGaming under the DraftKings brand in five U.S. states and in Alberta and Ontario, while its Golden Nugget Online Gaming brand operates in four U.S. states as well as Alberta and Ontario. DraftKings has also expanded beyond betting through its acquisition of Jackpocket, the leading digital lottery courier app in the United States. 

Meanwhile, its daily fantasy sports platform remains one of its core businesses and is available in 44 U.S. states, Washington, D.C., and select Canadian provinces. Currently valued at a market capitalization of $11.66 billion, DraftKings has found itself under intense pressure as the rapid rise of prediction market platforms like Kalshi and Polymarket has dampened investor sentiment. The growing popularity of these alternatives has raised concerns about the long-term competitiveness of traditional online sportsbooks, leaving DraftKings squarely in the market’s crosshairs. 

The stock’s performance reflects those worries. Over the past year, DraftKings shares have plunged 48.1%, and the selling has only intensified in 2026, with the stock falling another 32.14% year-to-date (YTD). In stark contrast, the broader S&P 500 Index ($SPX) has delivered strong gains, climbing 22.48% over the past year and another 13.26% so far in 2026. From its early September peak of $48.78, DraftKings has now tumbled roughly 51.6%, highlighting sharp deterioration in investor confidence in the stock.

Inside DraftKings Q1 Earnings Report

DraftKings delivered a solid start to fiscal 2026 when it reported first-quarter results on May 7, comfortably beating Wall Street’s expectations on both revenue and earnings. For the three months ended March 31, 2026, the company generated $1.65 billion in revenue, up 17% from $1.41 billion in the same quarter last year and ahead of analysts’ estimates of $1.63 billion. 

The growth was primarily fueled by efficient customer acquisition over the past year, continued healthy customer engagement, and a higher Sportsbook net revenue margin. Sportsbook remained the company’s biggest growth engine. Revenue from the segment climbed 24% year-over-year (YOY) to $1.1 billion, driven by higher betting handle and a 140-basis-point expansion in net revenue margin to 7.8%. Meanwhile, the iGaming business also continued to grow, with revenue rising 8.9% YOY to $461.3 million.

At first glance, user numbers appeared weaker, with Monthly Unique Payers (MUPs) declining 4% to 4.2 million compared to the prior-year quarter. However, the drop was largely due to lower Lottery users following DraftKings’ exit from Texas in 2025. Excluding the Lottery business, MUPs actually increased 2% YOY, reflecting strong customer acquisition and retention across its Sportsbook and iGaming platforms. 

At the same time, Average Revenue per MUP (ARPMUP) jumped 21% to $131, primarily driven by the improvement in Sportsbook net revenue margin. Profitability also continued to improve. DraftKings reported positive GAAP net income for the second consecutive quarter and repurchased $99 million worth of its own shares. On a per-share basis, GAAP EPS came in at $0.03, a sharp turnaround from a loss of $0.07 per share a year earlier and ahead of Wall Street’s estimate of $0.02. On an adjusted basis, EPS surged 66.7% YOY to $0.20.

Looking ahead, management reaffirmed its fiscal 2026 revenue guidance of $6.5 billion to $6.9 billion and adjusted EBITDA guidance of $700 million to $900 million, signaling confidence in the company’s growth trajectory. Investors won’t have to wait long for the next update, as DraftKings is scheduled to report its fiscal 2026 second-quarter earnings after the market closes on Thursday, August 6.

How Do Analysts View DraftKings Stock?

Despite the stock’s sharp decline, Wall Street remains largely optimistic about DraftKings’ long-term prospects. The stock currently carries a consensus “Moderate Buy” rating from analysts. Among the 36 analysts covering the company, 24 recommend a “Strong Buy,” three rate it a “Moderate Buy,” eight advise investors to “Hold,” and just one has a “Strong Sell” rating.

That optimism is also reflected in analysts’ price targets. The average target price of $33.64 suggests the stock could rally 42.5% from current levels, while the Street-high target of $50 implies an impressive 111.9% upside, highlighting the significant rebound potential many analysts still see in DraftKings.

On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com