How the New North Carolina Launch Impacts DraftKings Valuation in 2025

If you have been on the fence about DraftKings, you are definitely not alone. Investors everywhere are trying to decide whether this popular sports betting platform is a value opportunity or a risk worth rethinking. After a wild ride the past few years, DraftKings stock is up 19.2% so far this year, even though it dipped by 8.3% in the last 30 days. Over the last 12 months, the stock delivered a 10.6% return, and if you zoom out to the last three years, gains skyrocket to an eye-popping 182.4%. Of course, not every long-term holder is satisfied, given the stock is still down 22.4% from its five-year-ago level.

Some of that volatility makes sense. DraftKings has become a poster child for the legal online betting boom, riding waves of new state approvals and shifting perceptions among investors about industry risks and rewards. Sometimes, market optimism can outpace reality; other times, it reflects real momentum as new regulations and customer growth take effect. No wonder the stock seems to move sharply whenever there is even a whiff of policy change or competitive shakeup in the sector.

Given the fast-changing market and all the hype attached to DraftKings, you might be wondering how the company stacks up from a valuation perspective. Our value score system rates DraftKings at 3 out of 6, meaning it looks undervalued in half of the six major valuation checks. So how do those numbers line up with different valuation approaches? Let’s run through the methods analysts use to break down whether DraftKings is fairly priced, or if there is an even better way to think about its true worth at the end.

Why DraftKings is lagging behind its peers

Approach 1: DraftKings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates the value of a business by projecting its expected future cash flows and then discounting those back to today’s value. For DraftKings, this involves analyzing both recent and anticipated cash generation to assess what the business could be worth.

Currently, DraftKings is generating free cash flow of $360 million per year. According to analyst estimates and long-term projections, this figure could grow to over $2.6 billion by the end of 2029. These growth trends reflect new market expansions and the company's ability to capture more users as legal sports betting becomes more widespread across the country. Projections extending over a decade involve an increasing degree of uncertainty, but they are based on both analyst coverage for up to five years and more cautious extrapolations beyond that period.

When all these future cash flows are totaled and appropriately discounted, the estimated intrinsic value for DraftKings is $110.70 per share. At current levels, this valuation suggests the stock is trading at a 60.9% discount compared to its projected intrinsic worth, indicating it appears undervalued based on today's price.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DraftKings.

Our Discounted Cash Flow (DCF) analysis suggests DraftKings is undervalued by 60.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: DraftKings Price vs Sales

The Price-to-Sales (P/S) ratio is often viewed as a helpful valuation method for growth companies like DraftKings, particularly when profits are irregular or negative. Because DraftKings is still building scale in a rapidly expanding market, revenues can be a more stable measure than earnings. For companies that are not yet consistently profitable, like DraftKings, P/S helps investors focus on how the market is valuing each dollar of sales, providing a useful yardstick to compare against rivals and the broader industry.

The company’s current P/S ratio stands at 3.97x, just above the peer group average of 3.69x and considerably higher than the hospitality industry average of 1.67x. However, headline comparisons can be misleading, especially in high-growth sectors where premium multiples are common. Growth rates, company size, growth prospects, and business risks all affect what a “normal” or “fair” multiple should be. Higher growth and lower risk generally justify higher multiples.

This is where Simply Wall St’s "Fair Ratio" comes in. The Fair Ratio for DraftKings is calculated at 3.94x, a proprietary metric that integrates factors like profit margins, growth rates, the company’s specific risks, and its market cap. Unlike simple peer or industry averages, the Fair Ratio adjusts for the company’s unique financial profile, competitive position, and future expectations. In DraftKings’ case, the actual P/S of 3.97x is extremely close to this Fair Ratio, suggesting the share price now reflects the company’s growth profile and risk level quite accurately.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DraftKings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, powerful concept: it is your personal story or perspective about a company’s future, supported by your own fair value calculations, revenue and earnings forecasts, and profit margin assumptions. Narratives let you build an investment case that connects the company’s story, financial forecast, and fair value all in one place.

On Simply Wall St's Community page, millions of investors are already using Narratives as an accessible tool to visualize their investment thesis and decide when to buy or sell. Narratives show you how fair value stacks up against the current price and update dynamically as fresh news or earnings are released, so your outlook can adapt to real-world events in real time.

For example, when it comes to DraftKings, some investors see robust future growth from regulatory expansion and assign an optimistic fair value near $78, while the most cautious anticipate slower earnings and price in just $39.50. Narratives make it easier to test these perspectives for yourself and gain clarity on your next investment move.

Do you think there's more to the story for DraftKings? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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