Shares of sports betting and iGaming giant DraftKings (DKNG -5.08%) fell 10.2% on Tuesday as of 12:32 p.m. ET.
DraftKings didn't have any company-specific news today, but was rather affected by the success of an up-and-coming privately owned competitor. Oh, and worsening consumer sentiment data didn't help, either.
Kalshi is in DraftKings' rearview
Investors might not have heard of the betting platform Kalshi, as the company, which was founded in 2018 and backed by a number of high-profile venture capital firms, is still private. Kalshi initially unveiled its trading platform in mid-2021, and was primarily geared toward giving investors the ability to bet on real-world events, such as economic data or political happenings.
However, Kalshi has more recently made a push into real-time sports betting. This past weekend, Kalshi posted a record trading volume on Saturday, only to then exceed that record on Sunday. The all-time high trading was notable, as Kalshi hadn't posted record trading volume since the November 2024 presidential election, nearly a year ago.
Surging sports betting volumes on Kalshi could be a competitive threat to DraftKings and its public competitors, which were also in the red today. While DraftKings generally reported strong results last quarter on a year-over-year basis, the company did show some signs of potential deceleration.
For instance, while DraftKings' sports book handle revenue was up 45% last quarter, that seemed to come from take rate increases, as overall sports book betting volumes were only up 11%. Additionally, second-quarter unique visitors flattened out relative to the prior quarter.
In addition to the positive Kalshi data, today also saw a worse-than-expected September consumer sentiment reading from The Conference Board. That negatively affected most consumer discretionary stocks, DraftKings included.
Image source: Getty Images.
DraftKings and consumer stocks under pressure
DraftKings currently trades at 28 times this year's earnings expectations and 18.6 times 2026 earnings estimates. That's actually not expensive for a growth company, but if a growth company begins decelerating or seeing margin compression, the risks of a bigger drawdown increase.
DraftKings is still a leader in the space and should continue growing, but near-term competitive and macro uncertainty puts shares at risk of further downside, even after today's downdraft.
