Bet On It: North Carolina to launch mobile sports betting on Monday

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: Caesars Entertainment (CZR) announced a partnership with chef Rick Bayless to bring his restaurant Tortazo to two of the company’s destinations. Harrah’s Joliet and Caesars Palace Las Vegas will welcome Tortazo later this year. Inspired by Mexico City’s hospitality and colorful culture, Tortazo is a fast-casual Mexican restaurant by Michelin-starred chef, cookbook author and restaurateur Rick Bayless. The menu highlights the Mexican sandwich – the Torta – while offering guests a variety of Mexican dishes like tacos, quesadillas and house-made churros. The Harrah’s Joliet location is set to open in the spring and the Las Vegas location will follow in late summer. More information on both locations will be announced at a later date. Separately, In a regulatory filing, Caesars disclosed that director Michael Pegram bought 15K shares of common stock on March 6 in a total transaction size of $621.8K.

DraftKings (DKNG) announced plans to launch its online sportsbook in North Carolina on March 11. “This announcement is the culmination of DraftKings’ continued work with stakeholders and regulators across North Carolina to offer fans a responsible form of sports betting. Earlier this year, DraftKings and NASCAR agreed to terms on a written designation agreement, paving the way for the digital sports entertainment and gaming company to operate in the state. Once live in North Carolina, DraftKings Sportsbook will be available in 27 U.S. states, in addition to Ontario, Canada,” the company stated.

Elys BMG Group (ELYS) announces that Grand Central Sportsbook in Washington D.C. has been granted provisional approval to open its H Street sportsbook by the DC Office of Lottery and Gaming, Regulation and Oversight Division. As previously announced, this represents the third independently owned sportsbook venue in Washington, D.C. powered by Elys’ Gameboard betting technology. The grand opening of Grand Central H Street, located at 625-D H Street NE in Washington, D.C., is expected to take place ahead of the 2024 March Madness tournament and which will be announced along with planned promotions and events within the coming days. The Company is preparing to sequentially open multiple new retail sportsbook operations in Washington D.C. and other states throughout 2024 and looks forward to launching its online sportsbook in Colorado on a B2C basis through the Market Access Agreement with Caesars.

Churchill Downs (CHDN) announced that Exacta Systems has completed the installation of 175 Exacta-technology driven terminals at The Brook in Seabrook, New Hampshire. Exacta, acquired by CDI in August 2023, is a leading provider of central determinate system technology for historical racing machines, or HRMs. The Brook is a casino-entertainment destination located in the easternmost part of the state next to the Massachusetts border. The new Exacta-powered terminals feature top HRM gaming titles from leading manufacturers including Everi, AGS, Light & Wonder, IGT, and Incredible Technologies.

BUYING OPPORTUNITY: Investors showed interest in the potential timeline for a primary listing in the U.S. and the potential implications on associated indices, exploring whether inclusion in existing indices could create a favorable buying opportunity for Flutter Entertainment (FLUT), BofA told investors in a research note. The use of US GAAP figures is anticipated to simplify valuation comparisons, particularly against DraftKings. The firm’s valuation has been updated with the latest estimates, incorporating a higher multiple assumption for the U.S. business in its sum-of-the-parts analysis. With the recently completed U.S. secondary listing and the anticipated US primary listing, BofA believes the U.S. business should command a higher multiple. Taking into account this new higher EV/EBITDA multiple, the firm established a new price objective of 19,500p, indicating a 14% upside potential. This translates to a 10% premium in 2025 estimated EV/sales compared to DraftKings. Flutter’s reported figures adhere to prior period results in U.S. GAAP. A noteworthy observation in the Flutter/DraftKings comparison is the substantial difference between Flutter’s US business and that of its listed peer, DraftKings. In 2022, Fanduel incurred share-based compensation of $84M, significantly lower than DraftKings’ $579M for the same period. Given these considerations, BofA rates Flutter as a Buy.

EARNINGS RECAP: Rush Street Interactive (RSI) shares jumped nearly 20% following the company’s fourth quarter results. Monthly active users in the United States and Canada were approximately 160,000, up 7% year over year. MAUs in Latin America were approximately 204,000, up 33% year-over-year. Average revenue per monthly active user in the United States and Canada was $345 during the fourth quarter of 2023, up 5% year-over-year. ARPMAU in Latin America was $42, up 28% year-over-year. Richard Schwartz, CEO of RSI, said, “We concluded 2023 with a fourth quarter that produced records in both revenues and adjusted EBITDA. For the year, we grew revenue to $691 million on strong customer engagement and retention. At the same time, we improved our Adjusted EBITDA by $100 million compared to the prior year. These results and the ensuing momentum have carried into strong guidance for the new year, reflecting our longstanding customer-centric principles and obsession with developing innovative and differentiated user experiences.” Despite beating expectations, JMP Securities downgraded Rush Street Interactive to Market Perform from Outperform without a price target. The company reported a “great quarter” and an “encouraging” outlook, but the shares do not offer enough upside from current levels, the analyst contended. The firm sees the shares as fairly valued.

Super Group (SGHC) reported Q4 results on Thursday, surpassing the revenue figure of last year. Monthly average customers for Q4 was 4.7M. Neal Menashe, CEO of Super Group, commented: “We have made tremendous strides in 2023 and are delighted to have achieved an all-time revenue record of EUR 1.4 billion, enabling us to comfortably surpass our guidance for the year. Q4 2023 was particularly strong. Despite the challenging start, we set record breaking totals for revenue, customer numbers and deposits cementing our position as a growing, cash generative and geographically diverse online sports betting and iGaming operator. iGaming continues to be the largest part of our business, allowing us to manage moments of volatility in the sportsbook to deliver record-breaking results. We are confident that we will achieve the double-digit top-line growth that we are projecting for 2024.” Shares of Super Group were up over 12% subsequently.

Genius Sports (GENI) surpassed analyst consensus in terms of revenue, but fell short of the mark in terms of EPS in Q4. However, Q1 and FY24 revenue guidance did come in ahead of estimates. “We are excited to report our eighth consecutive quarter of financial results above expectations, while demonstrating the increasing profitability of our business model and our ability to consistently execute on our strategic objectives,” said Mark Locke, Genius Sports Co-Founder and CEO. “The business is now better positioned than ever to benefit from multiple structural growth drivers across the digital sports ecosystem, and we’re excited to continue our momentum into 2024.”

ADDITIONAL ANALYST COMMENTARY: Susquehanna downgraded Rush Street Interactive to Neutral from Positive with a price target of $6, up from $5. The analyst says a lack of internet casino legalization and higher Illinois-based online sports betting taxes disproportionately affect Rush Street’s prospects and are likely to negatively affect its 2024 consensus projections. In addition, the the stock has nearly doubled over the past year, and a potential takeout value of $1.5B seems “way too large” for either Caesars (CZR) or BetMGM to make in the foreseeable future, the analyst tells investors in a research note.

Oppenheimer raised the firm’s price target on Rush Street Interactive to $9 from $7 and maintained an Outperform rating on the shares after initial 2024 revenue/EBITDA guidance 5%/$2M that came in above Street on double-digit iGaming growth, higher CAC efficiencies, and scaling LATAM. The firm is most encouraged by Rush Street’s stable market share during a heavy promotional cycle, implying strong loyalty among core users.

Lastly, Wells Fargo raised the firm’s price target on Rush Street Interactive to $8 from $7 and reiterated an Overweight rating on the shares. The firm noted that the company had a strong Q4 report, with revenues 6%-7% vs. estimates and adjusted EBITDA of $11.5M topping its/Street’s $6M-$7M.

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 (FLUT), 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).