Gaming Shares Struggle Despite Solid Casino and iGaming Performance
Gaming shares have underperformed in early 2026 despite healthy operating trends across casinos and iGaming.
LISTEN TO THIS ARTICLE:Analysts at Truist Securities say market sentiment, not fundamentals, has been the primary drag on gaming equities so far this year. In a February 3 note, senior analyst Barry Jonas highlighted that regional casinos outside Las Vegas are delivering resilient results and that digital gambling continues to expand, yet share prices have failed to reflect those gains.
Jonas singled out DraftKings as his top pick heading into fourth-quarter 2025 results, pointing to a meaningful uplift in performance: “Handle was up 10%, but revenue shot 40% higher than the fourth quarter of 2024”, he wrote. Truist raised its projected free cash flow for DraftKings to $325 million from $223 million – comfortably above a recent Wall Street consensus near $255 million – and sees DraftKings generating roughly $940 million of cash flow in 2026.
FanDuel owner Flutter Entertainment also fared better than expected in the quarter. Truist nudged its 2025 fourth-quarter cash-flow estimate for Flutter to $340 million from $323 million and lifted its international revenue projection to $919 million versus an $898 million consensus. Jonas said he expects Flutter to generate about $3.7 billion of cash flow next year.
Despite those revisions, Jonas warned that stock reactions will depend heavily on each company’s 2026 guidance and on how managements discuss emerging prediction markets. “Still, the stocks will likely react more so to each’s respective 2026 guidance, on top of wider commentary on prediction markets”, he wrote.
New York’s early-season wagering data illustrates why investors are cautious. State figures for January showed NFL handle down about 3% while winnings increased 6%, producing a 10.2% hold. One week featured an unusually high 17.6% hold that produced roughly $96 million of revenue from $545 million wagered – a spike that can magnify short-term headline risk.
Jonas argued that some investors may be overstating the threat from prediction markets: “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.” He also noted near-term weather-related headwinds, saying, “January’s very unfavorable weather, with February not off to a great start either, could limit short-term upside”.
Related: Truist Warns Las Vegas Strip Recovery Remains Uncertain
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Catalysts and Risks to Monitor
Several near-term factors will determine whether the sector’s fundamentals translate into sustained share-price recovery. Company-level guidance and how executives frame 2026 growth expectations will be watched closely when DraftKings and Flutter report. Investors will scrutinize management commentary on user economics, promotional intensity, and international expansion.
Regulatory developments are another key variable. Prediction-market rules are evolving in major jurisdictions such as New York, California and Texas, and ongoing court cases plus oversight from a newly appointed Commodity Futures Trading Commission chair could reshape product economics or compliance costs. Jonas emphasized that, to date, fees tied to prediction markets have been small relative to the overall gambling market, but legal and political risk could amplify perceived downside.
Macroeconomic and operational variables also matter: weather and sports-seasonal patterns can distort handle and hold metrics from month to month, while regional casino visitation trends and digital customer acquisition costs will influence margin trajectories. For investors, the takeaway from Truist’s research is nuanced: underlying cash-flow trends look constructive, but the path to multiple expansion likely hinges on clearer 2026 guidance and resolution of regulatory and market-structure questions.
Truist reiterated Buy ratings on the major gambling operators in its mid-January corporate forecast, reflecting confidence in the sector’s medium-term outlook even as it cautioned about short-term volatility tied to the items above.
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