Analyst says DraftKings likely to be affected by Q4 NFL issues similar to FanDuel

Posted: January 8, 2025, 02:39 pm.

Last updated: January 8, 2025, 02:39 pm.

DraftKings (NASDAQ: DKNG) is likely to suffer a similar cold snap to rival Flutter Entertainment (NYSE: FLUT), which warned investors yesterday that its fourth quarter and 2024 earnings and revenue will miss previously released estimates due to customer-friendly results. Will come down from. On the NFL.

When Flutter issued its financial warning after the close of US markets on Monday, the stock fell in after-hours trading, but shares rose today with DraftKings. Still, Bank of America analyst Shawn Kelly warned that bettors' habit of picking NFL winners in the fourth quarter — the culprit behind Flutter's warning — has also affected DraftKings.

The analyst said the EBITDA facing DraftKings is likely to be lower than market participants expect and flutter on a proportionate basis.

DraftKings' Q4 fortunes were better than FanDuel

DraftKings and Flutter-owned FanDuel are often lumped together because they are two of the most recognizable brands in sports betting and hold a nearly impenetrable monopoly in the industry, but during October the former was slightly more popular than the latter. Must have been lucky. Through December period.

Several mitigating factors for DKNG include 1) DKNG's sponsorship of the Tyson-Paul fight in November with strong volume/holds, 2) hitting +4891 pre-made parlays on FanDuel in December with over 17 thousand bets imposed, and 3) adverse consequences during FanDuel's sponsorship of NFL Christmas Day games on Netflix,” Kelly said.

The NFL is the most betted league in America. Standalone NFL games, such as monday night football Or contests broadcast on holidays typically have higher stakes, creating a level of vulnerability for sportsbook operators if the favorite wins and gets covered.

As far as fluttering is concerned…

For DraftKings, Flutter and their smaller rivals, the good news is twofold. First, the rate at which NFL favorites won outright and swept this season is unusually high, indicating that a sequel next season is unlikely. Second, the data confirms that most American recreational bettors are not very good at sports betting. It's possible they'll recoup profits from the NFL regular season during the playoffs and as the NBA and college basketball grow.

Said another way, the NFL event is potentially fleeting and some analysts view any subsequent weakness in Flutter shares as a buying opportunity.

“Outside the US, Flutter saw sports betting results that benefited its financial position. We think the transitory tailwind helped drive revenue and adjusted EBITDA up by more than $100 million and up by about $30 million in the period,” says Morningstar's Dan Wasiolek. “We do not expect much change to our $275 fair value estimate, leaving the shares slightly undervalued. We'd view the stock's weakness as an opportunity for investors to accumulate an industry-leading brand, the source of its narrow moat rating, buoyed by Flutter's strong product development and risk management.