Bet On It: Vermont launches online sports betting

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

SETOR NEWS: Super Group (SGHC) provided comments by management in advance of conference participation next week. Neal Menashe, CEO stated, “We closed the year strong and reiterate our 2023 ex-US financial guidance of revenue of (EUR) 1.35 billion and operational EBITDA of at least (EUR) 240 million. For the year, we set annual records for both deposits and net gaming revenue and during the fourth quarter, we achieved a new record for unique monthly active customers, reflecting consistent customer engagement and our leading position in key markets. The growth in Africa continues and has resumed in Canada – this growth has more than offset the impact of regulatory changes in India. In the US, our net EBITDA investment for the year will be less than the (EUR) 70 million previously communicated. We are optimistic about another year of growth in 2024 and we plan to communicate our annual outlook when we announce our fourth quarter 2023 financial results in March.”

DraftKings (DKNG) launched its online sportsbook in Vermont on January 11. Vermont marks the 26th U.S. state, in addition to Ontario, Canada, in which DraftKings Sportsbook operates, further expanding the Boston-based operator’s presence to five of six New England states with its online sportsbook. “As a Boston-based company, we are thrilled for the opportunity to further expand in the New England region and provide Vermont with access to safe and legal sports betting,” said Matt Kalish, president, DraftKings North America. “This is an exciting time of year with the NFL Playoffs about to kick off, and Vermonters will now have the opportunity to engage with their favorite sports on our industry-leading DraftKings Sportsbook app.”

Churchill Downs (CHDN) announced a multi-year partnership between Churchill Downs Racetrack and Sports Illustrated for exclusive naming rights of a new luxury dining experience, Club SI, ahead of the 150th running of the Kentucky Derby on Saturday, May 4. Originally planned as the 1895 Club, Club SI is scheduled to debut on Opening Night of Derby Week and offer guests a modern race day experience. Club SI will debut as part of the $200M renovated Paddock Project at Churchill Downs for the upcoming 150th Kentucky Derby and offer a new luxury equine-focused dining experience with an view of the all-new Paddock and Paddock Runway giving guests behind-the-scenes experiences. “As we approach the 150th Kentucky Derby, we are thrilled to partner with a brand as iconic as Sports Illustrated to offer guests an enhanced way to enjoy this incredible anniversary event,” said Mike Anderson, president of Churchill Downs Racetrack. “Sports Illustrated shares our goal of combining exciting sports moments with upscale entertainment, and Club SI will provide the perfect space to achieve this.”

LOSING THE BATTLE, NOT THE WAR: In November, sports bettors experienced a relatively fortunate month, particularly with a majority of heavy NFL favorites winning, which proved beneficial for cash parlays. Additionally, several key games ended favorably for the public. Although extraordinary luck can impact short-term results, win rates remain stable and are structurally increasing over the medium term, Craig Hallum told investors in a research note. Interestingly, DraftKings provided guidance in early November, but subsequent weeks resulted in below-average win rates. Consequently, the firm is slightly reducing our revenue projection for Q4, applying this adjustment with a roughly 70% decremental margin to EBITDA. Despite the stock’s December underperformance following significant gains in 2023, we believe institutional investors are cognizant of the luck factor in November. While this might introduce some short-term volatility, the firm’s confidence in DraftKings’ product and industry potential is stronger than ever.

ADDITIONAL ANALYST COMMENTARY: Truist lowered the firm’s price target on five names in the space. The firm cut its price target on Gambling.com (GAMB) to $13 from $16 and reiterated a Buy rating, Bally’s (BALY) to $15 from $13 and kept a Buy rating, Boyd Gaming (BYD) to $76 from $83 and maintained a Buy rating, Penn Entertainment (PENN) to $27 from $25 and backed a Hold rating and MGM Resorts (MGM) to $58 from $55 and backed a Buy rating. 

Morgan Stanley views the gaming/lodging/leisure sector as presenting a mixed outlook heading into 2024. In areas where there is potential for upside to consensus, such as revenue per available room/lodging, valuations are relatively higher compared to historical levels within the group, although still below market averages. Conversely, valuations in gaming, especially on the strip, are lower, but expectations remain more ambitious than historical growth rates, the firm noted. Macau stands out as one of the few places where both multiples and expectations are reasonably aligned, yet recent declines in forward indicators and geopolitical uncertainties make it challenging to foresee a multiple re-rating. The firm updated estimates and price targets for recent announcements and high frequency trends, and to mark to market. Morgan Stanley raised price targets on MGM Resorts and Penn Entertainment this week. On the other hand, the firm slashed price targets on Caesars (CZR), Wynn Resorts (WYNN) and Boyd Gaming.

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).