DraftKings' plans for an aggressive spending spree into prediction markets has sent investors on edge. Analysts remain split on whether those investments will pay off.

Two Wall Street firms cut their target prices for DraftKings stock Monday, while another slashed earnings estimates. They all cited the company's massive ramp-up in spending on its prediction markets feature, which launched last December.

The sports betting firm blindsided investors last week with an earnings miss and slashed guidance when it reported third-quarter earnings. While DraftKings' Predictions showed customer growth in the quarter, its heavy investments into the feature unnerved investors.

The company said Thursday it expects $650 million to $700 million of adjusted Ebitda (adjusted earnings before income, taxes, depreciation, and amortization) investments on its prediction markets, and around $250 million to $350 million next year. In turn, the company also lowered both its full-year revenue and adjusted Ebitda forecasts for 2026.

The market reaction was swift Friday, with shares tumbling 21% to close at $18.51. The stock declined another 1.3% to $18.27 on Monday, cementing the stock's worst two-day period since November 2022, according to Dow Jones Market Data.

Analysts' lowered target prices seemed to fuel investors' jitters further on Monday.

Texas Capital Securities analyst David Bain lowered his price target to $20 from $26 while maintaining a Hold rating. Bain noted that heavy promotional discounting to defend market share against FanDuel-parent Flutter will shave about $100 million off sports betting revenue in 2026. Shares of Flutter rose 1.1% on Monday.

Bain also cited DraftKings' spending surge and noted that the company has a record of shifting marketing budgets.

"We believe investors will require several quarters to digest and regain underwriting confidence in the new numbers," he wrote in a note Monday.

StoneX analyst Mike Hickey also lowered his expectations. He slashed his Ebitda outlook for 2026 to $176 million from $575 million. That mirrors the company's steep guidance cut: DraftKings last week gutted its adjusted Ebitda forecast for 2026 by 70% to a range of $175 million to $275 million, down from between $700 million and $900 million previously.

Hickey pointed to cooling growth in New York and stiffer rivalry from Fanatics, while adding that last year's record betting volume and profits set an almost impossible benchmark to beat. Still, he maintained a Buy rating and $30 price target on the stock.

Truist Securities analyst Barry Jonas trimmed DraftKings' price target to $22 from $26, but maintained his Buy rating, saying the stock trades at a discount even if new ventures deliver zero return. He noted Monday that durable user retention and 20-month payback cycle -- during which DraftKings can break even on customer acquisition -- will push the company into positive free cash flow by 2028.

Of the 42 analysts polled by FactSet, 31 recommend buying DraftKings stock, while 10 rate the stock at Hold.