Bet On It: Flutter reports Q4 trading update ahead of U.S. listing

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: Sportradar (SRAD) announced the launch of Sportradar FanID, an end-to-end first-party marketing solution combining the first data clean room for the sports industry with the company’s proprietary marketing activation technology, to offer rightsholders and brands personalized fan engagement in a post-third-party cookie world.

Cathie Wood’s ARK Investment sold 212K shares of DraftKings (DKNG) on Thursday.

NFL TO NBA TRANSITION: UBS data indicates fluctuations in ESPN Bet’s (PENN) gross gaming revenue, or GGR, share throughout the quarter, with a trend of initially increasing and then decreasing. In contrast, FanDuel’s (PDYPY) GGR share exhibited a trend of decreasing followed by increasing in the five covered states, while DraftKings’ GGR share declined over the three months. This trend could be influenced by the sports calendar gearing up for the NBA, where FanDuel is presumed to have a stronger product, compared to the dominance of the NFL in Q3, where DraftKings is believed to excel, according to the firm. In the short term, UBS anticipate customers leveraging the free bets offered by new competitors. However, in the long run, the firm expects customers to choose the app with the most robust functionality for placing their wagers. Despite ESPN Bet’s initial impact on market share, UBS projects DraftKings and FanDuel to maintain their prominent OSB market shares, and the December decline in ESPN share supports this expectation.

FLUTTER U.S. LISTING NEAR : Flutter Entertainment reported its fourth quarter trading update yesterday. The company reported Q4 revenue of GBP 2.67B. compared to GBP 2.41B  The company said, “FanDuel remained #1 US sportsbook with 43% Q4 gross revenue market share, (51% net revenue share) with industry leading pricing and risk management capabilities delivering significant expected gross revenue margin growth. FanDuel Casino, #2 iGaming brand with continued market share gains to 26% in Q4, +5ppt year-on-year.” Peter Jackson, CEO, commented: “The Group traded well in Q4 underpinned by our leading local brands supported by global Flutter Edge advantages. In the US, FanDuel consolidated its sports leadership position during the peak quarter for sporting activity, while FanDuel Casino went from strength to strength. While sports results were very customer friendly, particularly on the NFL in November, the underlying momentum in the business remains very strong heading into 2024. Outside of the US, the quarter traded in line with expectations, with continued strong momentum in the UK&I supported by recent product enhancements and International growth driven by our “Consolidate and Invest” markets. Subject to the effectiveness of our Form 20-F registration statement with the US Securities and Exchange Commission, we are very excited that the addition of a US Flutter listing is now just days away. This is a pivotal moment for the Group as we make Flutter more accessible to US based investors and gain access to deeper capital markets. I am looking forward to 2024 and further building on the momentum within the Group to continue delivering growth.” Jefferies said in a research note to investors that the encouraging narrative around US market share gains and promotional efficiency sets a helpful backdrop into the US listing. The firm now sees a positive catalyst path around the U.S. listing, with valuation upside to reflect the c20% compound group EBITDA growth rate out to 2030. Additionally, Deutsche Bank analyst Simon Davies raised the firm’s price target on Flutter to 16,182 GBp from 15,172 GBp and keeps a Buy rating on the shares.

DECEMBER TRENDS: In December, FanDuel and DraftKings retained their lead, while ESPN Bet moved up from fourth to third place since its launch in November, and BetMGM (MGM) slipped from third to fourth place, according to Jefferies. The competition between FanDuel and DraftKings remains close in various categories, with FanDuel leading in Google search interest, Web traffic visits, and webpage visit duration score. ESPN Bet takes the lead in app downloads due to its recent launch, while DraftKings maintains its second-place position in all four respective categories. During December, there was minimal movement across categories, but notable changes included Hard Rock Casino climbing from fifth to fourth place in Google Search Interest Score, and Fanatics improving its rankings from ninth to eighth place in Web Traffic Visit Score and from eleventh to ninth in Webpage Visit Duration Score. In a broader lens, Jefferies is monitoring the legalization potential in Missouri and Georgia. The firm also is focused on the entry of Fanatics and the forthcoming entry of ESPN Bet by Penn.

GIVING IT ANOTHER SHOT: Minnesota State Senator Jeremy Miller has revealed his renewed commitment to promote the legalization of sports betting in Minnesota, following previous unsuccessful attempts, Eric Henderson, Caroline Cummings of CBS News Minnesota reported. On Wednesday, Miller introduced the Minnesota Sports Betting Act 2.0, incorporating adjustments informed by feedback received from constituents, fellow legislators, and various stakeholders. Miller said that the new bill consists of: “Licensing opportunities for Minnesota’s 11 tribal nations to offer retail and mobile sports betting. License holders would also have the option to operate retail betting on the premises of horse racing tracks or professional sports stadiums in Minnesota, pursuant to a partnership agreement with the track operator or sports team to whom the facility pertains. A 15% tax rate on sports betting revenue, which is broadly in line with the national average. Tax proceeds would provide charitable gaming tax relief for local charities, attract major sporting events to the state, boost horse racing, provide problem gambling resources, support youth sports, and facilitate athlete education programs. Restoring some of the controversial charitable gaming options that were eliminated by the 2023 tax bill, including free plays and bonus games on electronic pull-tabs.”

“Minnesota continues to miss out on what is now a $100 billion industry. So far, 38 other states, plus Puerto Rico and Washington, D.C., have already legalized sports betting,” Miller said.

ADDITIONAL ANALYST COMMENTARY: Stifel upgraded DraftKings to Buy from Hold with a price target of $45, up from $40. The stock’s recent correction affords an attractive entry point, with the company’s market share headwinds easing, the analyst told investors in a research note. The firm said DraftKings’ near-term share headwinds from ESPN Bet promotions and sports seasonality are fading, enabling investor focus to shift back to the fundamental outlook where healthy same-state handle growth, structural hold-rate expansion, marketing discipline, and fixed cost efficiencies “pose upside to an already impressive guided EBITDA path.”

Stifel lowered its price target on Caesars (CZR) to $67 from $70 and kept a Buy rating on the shares. The firm has lowered its Q4 EBITDA estimate by about 6%, citing softer regional results, lower F1 impact and lower online sports betting hold, but raised its out-year EBITDA estimates by about 3%. While the firm continues to believe the Las Vegas Strip will remain resilient throughout 2024, it is more concerned about regional gaming markets, but added that it believes its revised estimates are “properly accounting for some consumer softness.”

JMP Securities raised the firm’s price target on Churchill Downs (CHDN) to $148 from $146 and maintained an Outperform rating on the shares. Several property tours in recent weeks echoed a similar “more of the same” theme from the prior two years, the analyst tells investors in a research note. The firm recommends owning Churchill Downs, as it has growth catalysts in a flattish growth environment.

Macquarie downgraded Bally’s (BALY) to Neutral from Outperform with a price target of $12, down from $15. Macquarie updated forecasts and sector views for gaming, stating that in 2024 it favors companies with embedded growth, a focus on the higher end consumer, or deleveraging opportunities. On the other hand, the firm upgraded Wynn Resorts (WYNN) to Outperform from Neutral with a price target of $122, up from $115, citing forecasts for outsized growth. Macquarie updated forecasts and sector views for gaming, stating that in 2024 it favors companies with embedded growth, a focus on the higher end consumer, or deleveraging opportunities.

Deutsche Bank analyst Carlo Santarelli raised the firm’s price target on Las Vegas Sands (LVS) to $66 from $65 and backed a Buy rating on the shares ahead of the Q4 report. The firm sees a favorable risk/reward in Las Vegas Sands shares at current levels and believes continued strength and sequential growth in Macau, as well as the differentiation of the Macau gaming environment, relative to U.S. gaming markets, will drive share outperformance in 2024.

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).