Examining trends in first week of NFL and college football. a pathway to betting on elections opens up and other notable stories in the sports betting and iGaming space 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: Flutter Entertainment (FLUT) announced the acquisition of an initial 56% stake in NSX Group, a Brazilian operator of the Betnacional brand for cash consideration of approximately $350M. "The transaction fully aligns with Flutter's strategy to invest in leadership positions in international markets, securing a podium position for Flutter on completion in the regulating and fast-growing Brazilian market," the company said in a statement. On a standalone basis, NSX is expected to generate revenue of approximately $256M and adjusted EBITDA of approximately $34M in 2024. Under the transaction agreement, on completion, Flutter will pay cash consideration of approximately $350M and contribute its existing Betfair Brazil business, in return for a 56% stake in the newly combined Flutter Brazil business. In addition, a mechanism has been put in place to enable Flutter to increase its shareholding through reciprocal put/call arrangements in year five and year ten following the completion date. The company said revenue synergies will be achieved by providing NSX access to Flutter proprietary pricing and risk management capabilities. Jefferies noted that the deal secures a place in the Brazil market ahead of anticipated regulation in early 2025. NSX Group's brands, including Betnacional, will leverage Flutter's technology, product and talent to drive incremental growth and value, the firm noted. Jefferies told investors in a research note that Flutter is guiding to a low single-digit cut to consensus FY25E EBITDA to factor in customer acquisition investment around market launch, but sees a path to accelerated growth and greater medium-term profitability in a $3B market that is expected to fully be regulated in early 2025.
Cathie Wood's ARK Investment bought 177.5K shares of DraftKings (DKNG) on Thursday and 182K shares on Tuesday.
Also on Thursday, Penn Entertainment (PENN) disclosed that its director David Handler bought 10,000 shares of common stock on September 10 in a total transaction size of $175.1K.
NFL WEEK ONE: The NFL Week 1 betting volume appeared healthy, according to BofA, with transactions up 73% year-over-year, including 50% growth in New Jersey. Active users across sportsbooks increased by 55% year-over-year, and there were over 600,000 new sportsbook app downloads since Thursday. The firm noted that overall downloads across all sportsbooks were down 1% year-over-year. FanDuel led with 10% growth, while DraftKings saw new downloads decrease by 13% year-over-year. Given DraftKings "strong" customer acquisition in the second quarter, Jefferies believes that their customer acquisition may be more evenly spread out this year. From a daily active user perspective, DraftKings led with a 28% active user share, followed by FanDuel at 26%. DraftKings active users were up 34% compared to FanDuel's 13% increase. Jefferies told investors that several key factors impact the hold in any given week, including favorites winning outright for moneyline bets or covering the spread, over-unders and popular prop bets, especially for top athletes and stars. Outcomes on over/unders were more evenly split with eight overs, seven unders, and one push. Of the most popular prop bets on BetMGM (MGM), 3 out of 5 bets hit, and nine out of 16 favorites covered.
NEW SEASON, NEW PROMOS: Of the seven sportsbooks' promotional offers tracked, two had new user offers up year-over-year, according to BofA. DraftKings raised their offer to bet $5, get $250 plus one month of NFL+ Premium, compared to bet $5, get $200 last year. FanDuel's offer of bet $5, get $200 plus a three-week trial of NFL Sunday Ticket remained in line with last year. It is believed that DraftKings increased promotional offer reflects higher planned customer acquisition spend, differing from their March Madness and North Carolina launch strategy, which had them at or below the prevailing market.
NEW YORK COLLEGE FOOTBALL TRENDS In the first week of college football, handle was up 28% year-over-year in New York, in line with 29% year-over-year handle growth in August. Following the Gaming & Lodging Conference last week, BofA sensed that volume and parlay mix for college football Week 1 was "strong" for both DraftKings and ESPN Bet. Overall, New York's hold was 7.6% in the week ending September 1, suggesting that outcomes were somewhat unfavorable for the books.
PUT YOUR MONEY WHERE YOUR VOTE IS: On Thursday, a federal judge issued a decision that could pave the way for legal betting on U.S. elections, Ricky Henne of Action network reported, citing several reports. The ruling rejected the Commodity Futures Trading Commission's, or CFTC, appeal of a decision from last week, which allowed Kalshi, a startup predictions market, to offer contracts on this year's elections. The CFTC had argued that election contracts do not serve the economic purpose of the futures markets and could impact the integrity of elections. However, Thursday's decision lifted a temporary stay that had been in effect after the initial ruling. Although the CFTC has announced plans to appeal, the public can now purchase contracts on which party will win control of the Senate and House of Representatives.
ADDITIONAL ANALYST COMMENTARY: Exane BNP Paribas upgraded DraftKings to Neutral from Underperform with a price target of $35, up from $33. The firm is "encouraged "by DraftKings' "resilient" market share and recent positive customer acquisition dynamics, as well as its "penchant for beating and raising guidance." The analyst sees an improved near-term outlook for DraftKings but still has concerns around the company meeting its profit margin forecasts amid rising domestic taxes. The stock in morning trading is up 1% to $36.58.
Barclays initiated coverage of the Flutter Entertainment U.S. shares with an Overweight rating and $263 price target. The company offers an attractive combination of "product moat, unmatched scale," and global total addressable market opportunity ahead, the analyst told investors in a research note. The firm said Flutter is "winning all legs of a global parlay."
Stifel lowered the firm's price target on Wynn Resorts (WYNN) to $103 from $121 and kept a Buy rating on the shares. Shares are down about 17% year-to-date and continue to get pressured due to the company's heavy exposure to the controversial Macau gaming market, notes the analyst. While the firm "fully understand the current lack of investor appetite to own Macau-centric stocks," Stifel believes current trading levels are "essentially pricing in almost zero value" for the Macau assets as well as their UAE project, which it calls "way too pessimistic/Draconian" and "somewhat ridiculous under any scenario." Even after lowering its estimates, the firm views current trading levels as "extremely attractive" and would be using recent weakness to accumulate shares, the analyst noted.
Macquarie said that based on its proprietary hold model, the firm calculated NFL market hold of 7% for the week of September 2-8, below its long-term average of 9%. The firm further estimates total sports betting market hold of 8% for the week of Sept 2-8, assuming NFL hold of 7% and 9% hold for other sports. New York reported sports betting hold of 8% for the week of August 26-September 1, which included week 1 of college football. Of note, handle grew 28% year-over-year vs the same week last year, which it views positively for NFL. Based on New York data, Macquarie estimates Q3 hold is trending to flat year-over-year at 9.7%. The firm likes the Online sector this fall and highlights DraftKings as a top pick.
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).
