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Bank of America downgraded online betting giants DraftKings (DKNG) and Flutter Entertainment (FLUT), the parent company of FanDuel, over a series of headwinds that risked hitting the companies all at the same time. This "perfect storm," as Bank of America analyst referred to it, included declining margins, the possibility of new taxes on betting companies in the U.S. and U.K., and competition from prediction markets. The combination of these factors lowered the long-term earnings outlook for both stocks, according to BofA. Bank of America downgraded both stocks to Neutral from Buy and lowered their price targets. The bank reduced Flutter's price target 23% from $325 to $250. It dropped DraftKings' target from $40 to $35. Flutter and DraftKings on Tuesday traded near 222 and 29 a share. In the report, Bank of America dropped its 2026 EBITDA forecasts for the two companies. Flutter's 2026 estimates dropped to $3.66 billion from $4.24 billion. While DraftKings fell to $1 billion from $1.26 billion. Among the reasons Bank of America cited was the fact that the growth rate for the total amount of bets had slowed. At the same time, the possibility of additional taxes and the continued need for heavy promotion costs needed to fend of the entry of new competitors like prediction markets meant that margins would get compressed. On Monday, BMO Capital Markets lowered its price target for DraftKings from $65 to $63, according to FactSet. The new target still implies a 54% upside from the stock's current price. However, unlike Bank of America, BMO rates the stock a Buy. DraftKings And Flutter Struggle Both Flutter and DraftKings fell on Tuesday after the report's release. Flutter fell 4% and DraftKings dropped 5%. So far this year Flutter is down 14% and DraftKings has declined 22%. Both stocks are down sharply from highs in August and September. YOU MAY ALSO LIKE: Why This IBD Tool Simplifies The Search For Top Stocks
