Gaming Stocks Struggle Despite Strong Industry Trends

Gaming stocks have struggled to gain traction in early 2026, even as underlying industry trends remain solid, according to Truist Securities analyst Barry Jonas. 

In a February 3 note to investors, Jonas explained that the weakness comes despite strong regional casino results outside Las Vegas and promising digital-gambling growth.

In mid-January, the full-service corporate and investment banking arm that belongs to the Truist Financial Corporation released a forecast on the direction of the gaming sector, retaining Buy ratings on DraftKings and Flutter. 

DraftKings, Top Pick into Q42025 Earnings

In the new investor note, Jonas singled out DraftKings as his top pick heading into fourth-quarter 2025 earnings. “Handle was up 10%, but revenue shot 40% higher than the fourth quarter of 2024,” he noted. 

Based on that performance, he raised DraftKings’ projected cash flow from $223 million to $325 million, well above Wall Street’s $255 million estimate. 

FanDuel parent Flutter Entertainment also saw its fourth-quarter cash-flow forecast nudged up to $340 million from $323 million, with international operations projected at $919 million versus a consensus of $898 million.

“Still, the stocks will likely react more so to each’s respective 2026 guidance, on top of wider commentary on prediction markets,” Jonas added. For 2026, he expects DraftKings to generate $940 million in cash flow and Flutter $3.7 billion.

The New York Cautionary Tale 

Jonas highlighted New York’s online sports betting data as a cautionary note. NFL handle in January was down 3%, but winnings were up 6% with a 10.2% hold. 

A single week saw a 17.6% hold, yielding $96 million in revenue from $545 million wagered. 

Jonas suggested investors may be overestimating the impact of prediction markets on traditional sports betting: “We believe that weaker handle growth in New York … has spooked investors into thinking prediction market cannibalization is more prevalent than it may actually be.”

Prediction markets remain a hot topic, particularly in states like California, Texas, and New York, where sharp bettors and college football wagering are common. 

Jonas warned that regulatory developments, court cases, and the new CFTC chair could affect the marketplace, though the overall fees remain small relative to the broader gambling industry. 

He also mentioned the “very unfavorable” January weather, “with February not off to a great start either,” which, he believes, could “limit short-term upside”. Nonetheless, the underlying trends continue to point to potential growth later in the following months, the analyst added.