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) has been selected as the successful bidder for the global ATP data and betting streaming rights starting 2024. It follows an extensive RFP process led by Tennis Data Innovations, or TDI. The RFP process was initiated by TDI in January and saw five bidders submit detailed proposals across multiple rounds, for a six-year rights cycle beginning in 2024. The process took to market rights that have grown significantly in value over more than a decade. The process followed the setup in 2020 of TDI as a specialist joint venture vehicle of ATP and ATP Media to oversee innovation, development, and commercial management of all data and betting streaming products for the ATP Tour and ATP Challenger Tour.
MARCH MADNESS: A quarter of all American adults, approximately 68M, intend to wager $15.5B on this year’s NCAA Men’s Division I Basketball Tournament, according to a new survey from the American Gaming Association, or AGA.
- 31M American adults plan to place a traditional sports wager online, at a retail sportsbook or with a bookie.
- 21.5M plan to bet casually with friends.
- 56.3M plan to participate in a bracket contest.
“March Madness is one of the best traditions in American sports—and America’s most wagered-on competition,” said AGA president and CEO Bill Miller. “Critically, the expansion of regulated sports betting over the past five years has brought safeguards to more than half of American adults who can now bet legally in their home market.” The growth in March Madness betting is driven by a resurgence of bracket contests as well as Americans taking advantage of the expansion of legal online wagering. Three-fourths of online bettors say this will be their first time betting on March Madness online. While 18 million more American adults plan to wager on March Madness compared to last month’s Super Bowl, Americans are expected to wager half a billion dollars less on the tournament than they planned to wager on the Big Game. Since last year’s tournament, Kansas, Massachusetts and Ohio have launched retail and mobile sports betting markets, while Maryland has launched mobile wagering. This year’s March Madness—with 67 games over three weeks—will be the first to feature Las Vegas as a regional host location. “With the excitement around March Madness, the AGA and our members want to remind anyone getting in on the action to have a game plan to bet responsibly. That means setting a budget, knowing the odds, keeping it social and always playing legally,” added Miller.
Among bettors, Kentucky is the most popular choice to win the national title (9%), followed by Texas A&M (8%), and Gonzaga, UCLA and Alabama (6%).
LAUNCHES: Total sports betting/iGaming gross gaming revenue, or GGR, was $1.47B in January, up 42% year-over-year, with sports betting GGR up 56% and iGaming GGR up 20%. On January 1, Ohio launched legal sports wagering, with full-month GGR of $209M on $1.1B in handle. Wells Fargo believes the launch/promo period is further compressing. January handle of $11.4b was a record, reflecting a full sports calendar and the launch of new states. The firm told investors that recent launches in Maryland/Ohio show higher initial promos from the Big 3 potentially flushing out smaller operators. Promotions as percent of handle was 30% for the two launches, led by FanDuel, DraftKings (DKNG) and BetMGM (MGM), which were 90% of promos/handle/GGR. The firm concluded Massachusetts launched March 10, so Big 3 promo spend/losses could be pulled foward from 2Q; for DKNG, this could imply downside to Q1 Street EBITDA of $217M, but upside to Street’s $76m in Q2.
EARNINGS RECAP: On Tuesday, Super Group (SGC), the parent company of Betway and Spin, reported its fourth quarter earnings. The company reported Q4 revenue of EUR 329.1M which fell short of the $341M of last year. Monthly average customers for the fourth quarter was 3.4M. Neal Menashe, CEO of Super Group, commented, "Super Group is a leading global pure-play sports betting and online casino company seeking to continually optimize and grow our global footprint, including in the U.S. We continue to efficiently invest in our brand, enhance our technology platform and benefit from our consistent cash generation. We feel we are well positioned to apply our well tested strategies to the U.S. markets and capitalize on what we see as a multi-year investment opportunity."
Canaccord downgraded Super Group to Hold from Buy with a price target of $5, down from $8. While stating that the company reported "solid" Q4 results, including active customers, revenue, and adjusted EBITDA that all came in ahead of expectations, Super Group offered a "mixed" 2023 outlook that reflects macro uncertainty and a margin drag from U.S. investments, the firm told investors. The firm acknowledges its new price target "implies a significant potential return," but it thinks a Hold rating is appropriate "given the stock’s inherent volatility."
Sportradar also reported Q4 earnings, as shares were up 7% in the aftermath Wednesday. The company highlighted a second consecutive quarter of positive adjusted EBITDA in the United States. Carsten Koerl, CEO of Sportradar said: "I am very pleased with our strong results driven by exceptional execution this past year. We saw excellent performance across all of our key performance metrics despite challenging macroeconomic conditions including a second consecutive quarter of positive Adjusted EBITDA in the U.S. Our continued long-term partnerships with leading global sports bodies, and innovation across new technologies such as artificial intelligence and computer vision and as important, a team passionate about delivering solutions to our clients, make us very excited about our growth in 2023 and beyond." Additionally, the company posted adjusted EBITDA is expected to be in a range of $168M-$178.7M, representing 25% to 33% growth versus last year. Adjusted EBITDA margin is expected to be in the range of 17% to 18%.
Jefferies raised the firm’s price target on Sportradar to $11 from $10 but maintained a Hold rating on the shares. The analyst cited the company’s better than expected Q4 results, along with strong revenue and EBITDA guidance for 2023 that "should be taken positively". The firm added, however, that while the continued development in AI technology and new contracts with FanDuel and ATP have positioned Sportradar solidly near-term, the stock’s long-term valuation is "less clear". On the other hand, Needham analyst Bernie McTernan lowered the firm’s price target on Sportradar (SRAD) to $15 from $17 but kept a Buy rating on the shares after its Q4 results. AI is shaping up to be a key topic in the sports betting tech space, with a recent mention during the company’s earnings call and Genius Sports’ (GENI) recent deal with the NBA for the next iteration of its Second Spectrum technology platform, the analyst tells investors in a research note. The firm adds however that it has reduced its 2023 and 2024 EBITDA estimates on higher expected AI spending.
ADDITIONAL ANALYST COMMENTARY: Truist initiated coverage of Churchill Downs (CHDN) with a Buy rating and $300 price target. The analyst believes that the company’s "iconic" Derby asset is just scratching the surface as sports teams, leagues and high-end brands are seeing record valuations. The firm added that Churchill Downs has admirably expanded into the HHR sub-segment of gaming, extending its moat in Kentucky but also setting up the company as the "best growth story in gaming".
Berenberg analyst Jack Cummings raised the firm’s price target on Flutter Entertainment (PDYPY) to 16,000 GBp from 13,800 GBp and maintained a Buy rating on the shares. Additionally, Jefferies raised the firm’s price target on Flutter Entertainment to 18,000 GBp from 15,000 GBp and reaffirmed a Buy rating on the shares. The firm sees Flutter’s U.S. division moving from losses in FY22 to "the group’s largest division" in FY26 and calls out 2023 as "the tipping point" for U.S. profitability. The path to a primary U.S. listing also "makes sense" and is a potential catalyst as it could attract a deeper investor pool and greater focus on valuation, the firm contends.
Jefferies raised the firm’s price target on Las Vegas Sands (LVS) to $66 from $64 and kept a Buy rating on the shares. Following property tours and management meetings in Macau and Singapore, the firm said its confidence in the recovery and capital spending for Las Vegas Sands is higher and it has raised its valuation multiple to reflect accelerating Macau trends and higher MBS estimates.
Jefferies analyst David Katz raised the firm’s price target on Wynn Resorts (WYNN) to $135 from $130 and backed a Buy rating on the shares. Following the firm’s property tours and management meetings in Macau and Singapore, Jefferies said Wynn’s properties remain well-positioned at the top of the market and "appeared to be capturing appropriate volumes."
BTIG analyst Clark Lampen raised the firm’s price target on DraftKings to $25 from $24 and reiterated a Buy rating on the shares as part of a broader research note on Digital Gaming following the group’s Q4 results. The analyst is positive on the company’s lower out-year cost commitment disclosure, which brings margins "about 100 bps higher".
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), 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).
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