Bet On It: ESPN Bet launches in 17 states

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space. 

SECTOR NEWS: Gaming and Leisure Properties (GLPI) issued the following statement following the announcement by Major League Baseball that the league’s owners have approved the move of MLB’s Athletics franchise to Las Vegas: “Today’s approval from Major League Baseball represents an important milestone in the collective effort to bring the Athletics’ franchise to Las Vegas. We are excited about the opportunity to work with our partners to develop and construct an entertainment and casino resort integrated with the new A’s stadium on Gaming and Leisure Properties’ property to reinvent the site on the south end of the iconic Las Vegas Strip. The arrival of the A’s as well as the new stadium and adjacent entertainment and casino resort, both of which are expected to open in 2028, represents a transformational project for Las Vegas, baseball fans, the local community and local employment, which will build on the city’s reputation for delivering unrivalled world-class entertainment options.” In May 2023, GLPI, Tropicana Las Vegas, Inc., a Nevada corporation and wholly owned subsidiary of Bally’s (BALY), and Athletics Holdings, which owns the Major League Baseball team currently known as the Oakland Athletics, entered into a binding letter of intent setting forth the terms for developing a Las Vegas stadium that would serve as the home venue for the A’s. “The stadium is expected to complement a casino resort redevelopment envisioned at GLPI’s 35-acre property in Clark County, Nevada, owned indirectly by GLPI through its indirect subsidiary Tropicana Land LLC, a Nevada limited liability company, and leased by GLPI to Bally’s. The letter of intent provides for the Athletics to be granted fee ownership by GLPI of approximately 9 acres of GLPI’s 35-acre site for construction of the stadium. Bally’s and GLPI have agreed to transfer the stadium site after the satisfaction of various conditions in exchange for the benefits that the stadium is expected to contribute to a new integrated casino and entertainment resort that will be developed at the site, Las Vegas, and surrounding areas. The letter of intent stipulates that the Athletics will assume all costs associated with the design, development, and construction of the stadium and Bally’s Corporation shall assume all costs for the entertainment and casino resort and hotel,” Gaming and Leisure stated.

Penn Entertainment (PENN) announced that ESPN Bet successfully launched in the 17 states across the U.S. where it offers online sports betting. In addition, Penn’s online casino offering is now accessible within ESPN BET via mobile and web under the Hollywood Casino brand in Michigan, New Jersey, Pennsylvania and West Virginia. In August, Penn entered into an exclusive long-term strategic alliance with Disney’s (DIS) ESPN and ESPN Enterprises relating to online sports betting within the United States. “We’re extremely proud to introduce ESPN BET and look forward to delivering an exceptional customer experience to fans across the U.S. Our successful launch is the culmination of months of hard work across both teams and we could not be more excited to roll out ESPN BET in partnership with ESPN. PENN’s operational excellence paired with ESPN’s unmatched brand and reach is a powerful combination that will drive this compelling new sportsbook.,” said Jay Snowden, CEO and President, Penn Entertainment.

Genius Sports (GENI) announced an expanded agreement with FanDuel (PDYPY) to deliver its BetVision streaming solution. FanDuel will unveil BetVision as part of its premium NFL offering through Genius Sports. As the exclusive distributor of NFL Official League Data, Genius Sports will continue to provide FanDuel with access to the league’s proprietary Next Gen Stats, or NGS, data as well as the official sports betting data feed. BetVision will allow FanDuel customers on mobile and tablet devices to take their live NFL viewing experience to the next level in the FanDuel sportsbook app. By incorporating BetVision into the FanDuel Sportsbook, fans will be able to watch select NFL games inside the app featuring live stat tracking used by some of North America’s largest broadcast and streaming partners.

The FBI has known the identities of over 12 hackers tied to the MGM Resorts (MGM) and Caesars (CZR) breaches for more than six months, Reuters’ Zeba Siddiqui, Christopher Bing and Raphael Satter reported, citing four people familiar with the investigation. Industry executives have told Reuters they were baffled by an apparent lack of arrests despite many of the hackers being based in America.

UPBEAT INVESTOR DAY: Jason Robins, CEO and Co-Founder of DraftKings (DKNG), stated that he expects more online sports betting expansion during the company’s investor day, according to a transcript provided by the company: “Most importantly, we absolutely expect more U.S. states to legalize OSB and iGaming. On this slide, you can see that we expect to operate OSB in 25 U.S. states and Puerto Rico in 2024, with iGaming also in 5 of these states. Importantly, there is also a very strong bill pipeline suggesting additional states could legalize various forms of online gaming in the years ahead. 8 additional states have introduced OSB legislation, and 8 additional states have also introduced iGaming legislation, representing 19% and 17% of the U.S. population, respectively. We will be focused on educating lawmakers about the benefits of regulated online gaming to their constituents in the years ahead to get them over the finish line.” The chief executive also provided some longer-term guidance during the event. Robbins noted, “As a result of our strong and improving unit economics, we are providing Adjusted EBITDA guidance for 2026 and 2028 only including the states already embedded in our 2024 guidance. To be clear, we absolutely expect additional states to legalize and launch OSB and iGaming over the next few years. In order to provide a view of what our existing states alone will generate in terms of revenue and earnings power, we are providing this guidance with the state composition that is consistent with our 2024 guidance and with no additional states included. As you can see, on this basis, we expect 2026 revenue of $6.2B and Adjusted EBITDA of $1.4B, representing a 23% Adjusted EBITDA margin. For 2028, we expect revenue of $7.1B and Adjusted EBITDA of $2.1B, representing a 30% Adjusted EBITDA margin. We will have higher revenue growth in the earlier years, so you can infer that we project 2025 revenue to be in the mid-$5B range and 2025 Adjusted EBITDA of between $900M and $1B… As you can see, our sustainable top and bottom-line growth outlook, long runway for margin expansion, and rapidly increasing free cash flow generation provide us with the opportunity to drive strong returns for our shareholders for years to come.” Deutsche Bank said the presentation was “largely as expected,” with management “telegraphing much of what was included in the presentation.” With the Q3 earnings beat and corresponding 2023 guidance raise, and now the analyst day, in the rear view mirror, the firm believes “the next question is the viability of out year forecasts,” says the analyst, who maintains a Hold rating and $31 price target on DraftKings shares. Additionally, Craig-Hallum raised the firm’s price target on DraftKings to $45 from $40 and maintained a Buy rating on the shares. Expectations were high for the company’s analyst event this morning and “the company didn’t disappoint,” said the analyst, who argues that management’s guidance for a path from an adjusted EBITDA loss in 2023 to $400M in 2024, nearly $1B in 2025, $1.4B in 2026, and $2.1B in 2028 “shouldn’t be viewed as aspirational but instead likely given.” The stock remains “a must-own growth stock with strong industry and business tailwinds,” the analyst added.

EARNINGS RECAP: Rounding out the last of the companies that reported third quarter earnings in the space, Gambling.com (GAMB) beat expectations. The company also reiterated its full-year revenue and EBITDA outlook. Charles Gillespie, Chief Executive Officer and Co-Founder of Gambling.com Group, commented, “Our third quarter results highlight our consistent performance driven by robust organic growth in North America. Even in what is traditionally a seasonally slow quarter, we grew new depositing customers 26% to surpass 86,000 which contributed to 19% revenue growth to $23.5 million, Adjusted EBITDA of $6.1 million and Free Cash Flow of $1.6 million.” Truist lowered the firm’s price target on Gambling.com to $16 from $17 but backed a Buy rating on the shares. The company’s Q3 adjusted EBITDA was inline on record revenues as media partnerships ramped faster than expected, the analyst tells investors in a research note. The firm adds however that the recent media deals are driving higher revenue growth than anticipated but at a lower-margin.

BofA summarized the biggest takeaways from Q3. During the last week of gaming earnings, there was a blend of results, leading to an overall steadiness in trading for gaming stocks, the firm noted. The main highlights include:

• MGM, Caesars, and Wynn Resorts (WYNN) striking provisional deals with the Las Vegas Culinary Unions.
• Macau promotions displaying stronger performance than anticipated, despite concerns regarding flow-through and margins.
• Encouraging signs of robust demand for Formula 1.

MARKET SHARE BATTLE: During October, FanDuel and DraftKings maintained their leading positions in the industry, with BetMGM overtaking bet365, which had held the third rank since August, according to Jefferies Digital Gaming Brand Matrix. The competition between FanDuel and DraftKings persisted across various categories. FanDuel took the lead in Google Search Interest, Web Traffic Visits, Webpage Visit Duration Score, and App Downloads. Meanwhile, DraftKings remained in second place for all these categories. Caesars witnessed an upward shift, rising from ninth to seventh place in Google Search Interest Score, from tenth to eighth in Web Traffic Visit Score, and from ninth to eighth in Webpage Visit Duration, likely attributed to the launch of its new iGaming app. BetRivers also saw improvements in Google Search Interest, while PointsBet climbed two positions in Webpage Visit Duration rank. Notable changes occurred among all brands, with private operators gaining momentum. BetRivers led in momentum score for October, rising from sixth place in September, while Tipico surged six positions to secure second place. Bet365 remained steady in third place. However, FanDuel experienced the most significant drop in momentum score, falling to fourth position from its first-place ranking the previous month, while DraftKings slipped to eighth from second. Presently, FanDuel operates in 19 states, whereas DraftKings operates in 21. Globally preferred names include FanDuel , DraftKings , MGM Resorts, and Rush Street Interactive (RSI). The positive correlation between market performance at the top two companies remains noteworthy, as they consistently rank as top operators across various categories in the index and in gross gaming revenue, or GGR. DraftKings has shown recent strength in market share over FanDuel. BetMGM’s market share has been declining lately and is in direct competition with bet365 in terms of rankings. Additionally, Jefferies contends that there’s optimism regarding iGaming-focused operator Rush Street Interactive due to its superior economics, higher margins, and the potential for strong returns in the coming years. 

STATE UPDATE: New York and Oregon have emerged as the initial states to disclose their online performance for October, according to Jefferies. In Oregon, where DraftKings enjoys a monopoly, the growth in handle slowed down. However, an upswing in margins contributed to an accelerated GGR growth, resulting in an all-time high monthly GGR. In contrast, margins in New York didn’t exhibit a similar sequential improvement. Instead, margins experienced a decline of 1.1 percentage points month-on-month, dropping to 8.3%. Upon deeper investigation, this decline seems to be primarily driven by a single week with poor margins at the conclusion of October. Consequently, the overall October margins in New York decreased from a 10.6% run-rate observed in the initial three weeks to an average of 8.3%. Nevertheless, the state still managed to set new monthly records for both handle and GGR, marking the first state to surpass $2B in handle within a single month.

DELAYS IN THE TAR HEEL STATE: North Carolina regulators postponed the decision on a proposed ban on daily fantasy sports pick’em, opting to consider it later as they progressed with a series of NC sports betting regulations on Tuesday, Pat Evans of Legal Sports Report wrote. The Sports Betting Advisory Committee of the North Carolina State Lottery Commission endorsed an initial set of regulations for online NC sports betting during their session on Tuesday. The complete NC Lottery Commission will cast their vote on the initial draft this coming Thursday. In response to resistance from stakeholders in the DFS industry, the committee temporarily excluded a ban on DFS pick’em contests and assured that the regulatory agency would keep a close watch on this matter. Additionally, another comprehensive set of rules is currently in a phase of public comments, scheduled to conclude on November 27.

ADDITIONAL ANALYST COMMENTARY: Jefferies downgraded Entain (GMVHF) to Hold from Buy with a price target of 915 GBp, down from 1,335 GBp. The analyst cut earnings estimates through fiscal 2026 to reflect the company’s greater BetMGM investment and higher interest costs. Entain’s restructuring, MGM Resorts’ (MGM) own new share buyback program plus distractions from the cyberattack and Formula One in Las Vegas, may mean MGM sits on the sidelines and does not bid for Entain until clear U.S. market share gains are visible, the firm told investors in a research note.

Exane BNP Paribas also downgraded Entain to Neutral from Outperform with a 1,000 GBp price target. The firm now expects the company to generate no free cash flow in 2024 and for BetMGM to be run for zero profit.

Berenberg lowered the firm’s price target on Entain to 1,510 GBp from 1,650 GBp and kept a Buy rating on the shares.

Macquarie reiterated an Outperform rating and $42 price target on DraftKings following the company’s investor day, where it updated its TAM assumptions and longer-term outlook. The firm views DraftKings as the best way to play the burgeoning U.S. Online market given its first-mover advantage, strong brand recognition with the younger demographic, and superior tech. Given these trends, Macquarie believes the stock is well positioned to protect its leadership position by continuously reinvesting in its business and tech.

Craig-Hallum raised the firm’s price target on DraftKings to $45 from $40 and backed a Buy rating on the shares following the company’s analyst event. DraftKings’ dominance of online gambling in North American is clear and sustainable with strong operating leverage over the coming years, the firm argued. Assuming no incremental state legislation, management now expects $2.1B of EBITDA in 2028 vs previously viewing that as its long-term target. The path from an adjusted EBITDA loss in 2023 to $400M in 2024, nearly $1B in 2025E, $1.4B in 2026, and $2.1B in 2028 shouldn’t be viewed as aspirational, Craig-Hallum says, but instead likely given a byproduct of the cohort builds, accelerating product innovation, and industry-leading retention, all while reducing promotional and marketing intensity. DraftKings remains a must-own growth stock with strong industry and business tailwinds, adds the firm.

Piper Sandler reaffirmed an Overweight rating on DraftKings with a $40 price target following the investor day. The analyst walked away “impressed” with the company’s new financial targets. DraftKings’ market remains “very healthy” and it has a long runway for further market and revenue expansion, the analyst tells investors in a research note. Piper believes the industry tailwinds remain intact, with opportunity for further expansion as new states launch.

Craig-Hallum decreased the firm’s price target on Genius Sports to $12 from $15 given modestly lower multiple and higher discount rate and maintained a Buy rating on the shares. The firm notes the company continues to be consistent in its messaging, strategy, execution and results. Genius reports another beat/raise quarter showing strong revenue growth and operating leverage, Craig-Hallum adds.

Morgan Stanley cut its price target on MGM, Caesars and Penn. The firm is realigning its estimates and valuation methodology across the space to reflect widening differences in business models, potential for reinvestment, and moving to 2026 EBITDA across its coverage given still ramping new states.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).