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: Online gambling company Kindred Group (KNDGF) is accelerating plans for a potential sale, following the departures of senior managers in recent weeks, Bloomberg’s Vinicy Chan and Christopher Palmeri reported, citing people familiar with matter. The company, which runs sports wagering site Unibet and online casino 32Red, has asked prospective bidders to submit first-round offers by the end of May, the people said. Industry rivals including MGM Resorts (MGM) are among possible suitors studying the business, the people said. Kindred has also approached Evolution AB (EVGGF), Entain (GMVHF) and Flutter Entertainment (PDYPY) to gauge their interest, though some of the companies have indicated they’re unlikely to proceed with bids, the sources said
MOUNTAINS ARE GREEN: A bill to legalize online sports betting in Vermont passed the House and Senate and now goes to Governor Phil Scott, who indicated he will sign it, Darren Rovell of Action Network reported, citing a tweet from Legal Sports Report. Vermont, the second smallest state in the country by population, would be the last state in the Northeast to grant residents the right. The state projects that operators will net $10M per year in the first year. generating $2M in taxes. There will be no in-person betting in Vermont.
ALL IN THE DATA: In April, FanDuel, DraftKings, and BetMGM continued to lead in overall score, according to Jefferies market share insights. FanDuel and DraftKings continue to lead across most categories. FanDuel leads in webpage visit duration and has overtaken DraftKings in Google search interest. Meanwhile, Bet365 now leads in web traffic visit score, having surpassed FanDuel and DraftKings. The firm told investors that favored names globally are Flutter Entertainment, DraftKings, MGM resorts, Entain and Rush Street Interactive (RSI). Jefferies said that it remains constructive on iGaming-focused operator Rush Street Interactive, where "superior economics" and "higher margins" will likely lead to "strong" returns in out years. Although the route to legalization is longer in some states, we believe the proliferation of sports betting and iGaming will continue. We believe the Street enthusiasm for digital wagering has rebounded of late, and investors are responding to the acceleration in progress toward profitability.
NCAA SURVEY HIGHLIGHTS UNDERAGE GAMBLING ISSUE: The NCAA released survey results that show many young adults are wagering on sports, often despite age or geographic restrictions on legal sports betting. NCAA President Charlie Baker commissioned the survey weeks after taking over to establish a new baseline of sports betting activity, given the proliferation of online betting platforms and advertising consumed by young people. "We needed a new baseline so we can better understand what student-athletes are experiencing on their campuses and among their peers so we can best help them deal with the potentially disruptive dynamic of legal sports betting," Baker said. "Sports betting has increased interest in sports of all kinds, including college sports, which is great for our fans, but the NCAA and everyone from coaches to athletics department staff and college presidents must better understand what impact sports betting may have on student-athletes." The survey queried 3,527 18- to 22-year-olds to better understand the prevalence of various sports wagering behaviors, as well as how attitudes toward wagering are being impacted by external forces, such as advertising. Opinion Diagnostics conducted the survey by using a national online panel that mirrored the total population of that age group and included both college students and young adults not attending college. Current or former NCAA athletes may have been in the pool of respondents but not in sufficient numbers to examine their data separately. The NCAA will conduct a student-athlete-only survey in the coming months. Overall, the present survey found that sports wagering is pervasive among 18- to 22-year-olds, with 58% having engaged in at least one sports betting activity. Sports wagering activity is widespread on college campuses — 67% of students living on campus are bettors and tend to bet at a higher frequency. 41% of college students who bet on sports have placed a bet on their school’s teams and 35% have used a student bookmaker. Advertisements have a major influence on betting activity: 63% of on-campus students recall seeing betting ads. This is a higher rate than that found in the general population or those that commute/virtually attend college, and 58% of those students indicate they are more likely to bet after seeing the ads. Problem gambling shows up in this population, with 16% having engaged in at least one risky behavior and 6% reporting that they have previously lost more than $500 on sports betting in a single day. 70% of these risky gamblers believe consistent sports gambling will increase their monetary earnings. This population places bets in a variety of ways, but the accessibility of mobile sports betting has made that the preferred choice, with 28% choosing the mobile app method for their wagering. Live in-game betting is the most popular type of bet for those that use betting apps or visit in-person sportsbooks, surpassing more traditional forms of sports betting like money line or over/under. State legality and age restrictions do not pose much difficulty, as areas where betting is legal versus those where it is illegal have nearly the same rate of engagement. Betting is pervasive across the country: the Northeast has the largest portions of bettors with 61%, while the West has the lowest, with 54%. The NCAA continues to work with industry leaders, mental health experts, law enforcement and regulators, actively monitoring, researching and analyzing this landscape to devise effective ways to protect student-athlete well-being and minimize gambling harm.
ADDITIONAL ANALYST COMMENTARY: Lake Street initiated coverage of Genius Sports (GENI) with a Buy rating and $7 price target, calling it "a picks and shovels player" selling in-game data and "other sticky services" to sportsbooks such as DraftKings (DKNG) and bet365. The company, which came public via a SPAC transaction in 2021 and traded over $24 that year before collapsing to less than $3 per share in the summer of 2022, is "a case of the Genius baby being thrown out with the SPACwater," said the firm, which noted Genius is on the cusp of turning free cash flow positive and is growing faster than its "higher-valued peers."
Susquehanna upgraded Caesars (CZR) to Neutral from Negative with a price target of $39, up from $27, as the firm sees a more balanced risk/reward at current levels. Susquehanna noted that about 50% of its valuation is anchored to Las Vegas, which is "cycling into a seasonal air pocket" in Q2 and Q3 with tougher comps and an event slate whose sports events seasonally soften, but that is offset by a regional portfolio that has various projects that will contribute in addition to Caesars’s low-cost approach. As "they have done so many times," Caesars is likely to find favorable capital market events, which the firm thinks are "VERY important stock considerations given its high financial leverage," the firm added.
Jefferies lowered the firm’s price target on Bally’s (BALY) to $18 from $22 and maintained a Hold rating on the shares after updating the firm’s model to reflect the Q1 results reported on May 9 and management’s comments and guidance. The quarterly results and the prospective A’s deal support the firm’s view that the company "remains in its formative stages," said the firm, who expects further capital to be required by Bally’s as both its land-based and digital presence "continue to evolve."
UBS upgraded DraftKings to Buy from Neutral with a price target of $30, up from $19. The firm cited higher revenue growth and greater flow through to EBITDA for the upgrade. UBS sees a runway for DraftKings to deliver 20%-plus annual revenue growth through 2026. The company is penetrating new states faster, seeing improvements in "structural hold," and its existing state vintages are growing attractively with higher gross gaming revenue per player, the firm investors in a research note.
Lastly, Redburn upgraded Flutter Entertainment to Buy from Neutral.
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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