DraftKings Inc. (DKNG) stock intrinsic value fair value estimate & owner earnings analysis

DraftKings runs online sports betting (Sportsbook), online casino (iGaming), daily fantasy sports, a digital lottery courier (Jackpocket, acquired May 2024) and, since December 19, 2025, a CFTC-regulated prediction-markets app. About 97% of its 2025 revenue of $6.05 billion (up 27% from $4.77 billion) came from the United States. What the business actually earns. We measure the cash the business generates after stock compensation and the cost of keeping its technology current, and we strip out swings in customer-related timing (money owed to and held for players, vendor payment timing), which flattered cash flow by $97 million in 2025 and $335 million in 2024. On that basis owner earnings per share were about $(3.73) in 2021, $(3.19) in 2022, $(1.27) in 2023, $(0.76) in 2024 and about +$0.25 in 2025 (about $0.30 per share before interest, about $150 million). 2025 is the first year in which the business paid all of its costs, including roughly $339 million of stock compensation and about $146 million of capitalized software and equipment, and still had cash left over. Earlier years describe a much smaller, loss-making business, so we anchor on 2025 only; a single year is a thin base and is the main limitation of this analysis. The first half of 2026 gives no reason to lift that level: operating cash flow was $63 million versus $55 million a year earlier, stock compensation was lower ($148 million versus $164 million), but second-quarter revenue of $1.44 billion was below the $1.51 billion of a year earlier and the quarter posted a net loss of $68 million. Base case: about $0.80 per share. Business cash flow stays at about $0.30 per share for ten years, then declines about 10% a year as licenses, competition and tax changes wear the earning power down. That is worth about $3.15 per share before debt. Owner-earnings growth in the last completed year was an improvement of about $1.06 per share (from a loss to a small profit); we assume none going forward, because further profit improvement depends on continued margin gains, share gains and new products (including prediction markets, launched only in December 2025), none of which is secured or a long-proven repeatable process. We did credit that the state licenses and the large existing customer base already in place persist. Bull case: about $9.41 per share. Business cash flow per share rises to $0.60, $0.90 and then $1.20 over 2027-2029 (about $0.5-$1.06 per share of improvement was achieved in each of 2024 and 2025 and stock compensation has fallen from $398 million to $339 million while revenue grew 30%), stays there through year ten and then declines 10% a year. Worth about $11.77 per share before debt. Bear case: about $(2.01) per share. Business cash flow drops to $0.10 per share for two years (2025 benefited from higher sportsbook hold, and second-quarter 2026 revenue is already falling year over year; the tax legislation enacted in 2025 and new regulatory and competitive pressure in prediction markets are disclosed risks) and then declines 15% a year. The business is worth about $0.54 per share, and because the debt is larger than that, the company appears to owe more than it is worth in this case, roughly $2.0 per share or about $1.0 billion. It also assumes the convertible notes are refinanced at about 8%. Debt. At June 30, 2026 the company owed about $1.86 billion: $1.265 billion of zero-coupon convertible notes due March 15, 2028 (convertible at $94.85 per share, treated as debt to be repaid) and about $592 million on a Term B loan due March 2032 at roughly 5.6%. Because the convertible notes carry no interest, their value at a 6% rate is about $1.16 billion. We counted $984 million of cash on hand, less $400 million we consider needed to run the business (player funds are held separately and are excluded), leaving about $584 million of excess cash. Net debt is therefore about $1.17 billion, or about $2.35 per share, subtracted from each case (base: $3.15 less $2.35; bull: $11.77 less $2.35). The 2028 convertible maturity is the key financing event; in the bear case it must be refinanced at higher rates or through dilution. What could make this wrong. If margins keep widening faster than we credit, value is higher; if betting hold, state taxes or prediction-markets competition turn against the company, or if the 2028 maturity cannot be refinanced cheaply, value is lower. Owner earnings are small relative to revenue, so modest changes move value a lot, and the range of outcomes here is unusually wide. Stock compensation is treated as a real cost. A cash flow reconciliation of net income plus non-cash items to operating cash flow (adjusted for timing items) agrees within 1% in 2025.