Bet On It: Barstool eyes marketing partnership with DraftKings after lock-up

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:  Las Vegas Sands (LVS) announced it will purchase approximately $250M of SCL common stock that will be completed in the first half of 2024

FanDuel’s parent company, Flutter Entertainment (PDYPY), is poised to make its debut on the New York Stock Exchange and analysts believe that despite this entry, shares of its U.S. competitor DraftKings are expected to remain resilient in the face of increased competition domestically, Angela Palumbo of Barron’s wrote. On Monday, Flutter is set to accomplish a dual listing on the New York Stock Exchange under the ticker (FLUT).

Sportradar (SRAD) announced additional strategic actions as part of its previously announced initiatives to streamline its organizational structure.  As part of the organizational changes, Ulrich Harmuth, chief strategy officer, will be departing the company to pursue other endeavors and CFO Gerrard Griffin has informed the company that he will be leaving for personal reasons. “I am excited to announce this new global organization and leadership structure, which aligns our teams on our strategic priorities, promotes agile execution and better positions Sportradar for future growth,” said Carsten Koerl, CEO of Sportradar. “By centralizing our key business functions, we will foster greater collaboration and faster decision making, enabling us to drive further operating efficiencies and increased innovation across our business. These decisive steps will enable us to better serve our clients and partners as well as capture the significant market opportunities ahead of us. I am confident we have the right leaders in place, intently focused on executing on our strategic priorities. For 2023, we remain on track to deliver on our strong growth targets and are well positioned to maintain that momentum into 2024.” Effective immediately, the new organizational structure consists of six business functions: Product Delivery and Operations combines and centralizes content, product development and engineering globally to seamlessly deliver best-in-class products and solutions to clients and partners, led by Warren Murphy, previously Chief Product Officer and now Chief Delivery and Operations Officer.; Growth and Innovation combines growth, strategy and innovation to facilitate a unified vision for identifying and capitalizing on market opportunities, thereby ensuring a well-defined growth strategy fueled by continuous innovation, led by Nick Maywald, previously Chief Content Officer and now Chief Growth and Innovation Officer. Sportradar also reaffirmed its FY23 guidance of revenue in the range of EUR 870M to EUR 880M, representing year-over-year growth between 19% and 21%, Adjusted EBITDA in the range of EUR 162M to EUR 167M, representing year over-year growth between 29% and 33%, and adjusted EBITDA margin in the range of 18.4% and 19.2%. The company also reaffirmed its fiscal 2024 outlook for revenue and Adjusted EBITDA growth of at least 20%

Samuel Adams (SAM) is teaming up with DraftKings (DKNG) to give drinkers a fan prediction pool: “Groundhog Day Prediction Pool Presented by Samuel Adams Cold Snap.” 

ON TO THE NEXT ONE: Barstool Sports is in advanced talks on a wide-ranging sports betting deal with DraftKings, multiple people familiar with the negotiations told Sportico’s Eben Novy-Williams. Barstool won’t be lending its name to a sportsbook or betting app and the deal will be “a more traditional marketing partnership,” with Barstool promoting DraftKings odds and benefiting from customers referred to the sportsbook, the report said. Barstool is unable to finalize a betting deal until after the Super Bowl, because of a lock-up as part of its recent separation from Penn Entertainment (PENN), the sources added.

MOVING STATESIDE: Considering the consistent outperformance in market share, one could make a case for valuing FanDuel at a premium compared to the current valuation of DraftKings, Jefferies told investors in a research note. If the firm assumes a 20% premium and applies historical valuation multiples for international markets, it suggests a sum-of-the-parts price target of GBP 210. Alternatively, using that same 20% premium relative to DraftKings implies that Flutter, when excluding the U.S., trades at 8x EV/EBITDA compared to its historical 13.5x. When comparing this to a broader group of high-growth, digitally focused companies listed in the U.S., there appears to be a significant valuation discount, according to Jefferies. The firm concluded that the move to a U.S. primary listing creates a positive short-term catalyst path.

NFL PLAYOFFS: Canaccord noted that Week 18 of the NFL regular season, along with the playoffs and the Super Bowl, occurs in Q1. After a period of less favorable results for sportsbooks in Q4, the NFL playoffs had a promising start for operators. During Wild Card Weekend, the Texans, Packers, and Buccaneers all secured outright victories as underdogs. The Rams also covered the spread, and three out of six games stayed under the total, leading to a record weekly gross gaming revenue, or GGR, of $67M in New York, marking a 140% increase compared to the same week last year. The Divisional Round was also favorable for sportsbooks, with the public-backed Texans and Bills losing outright and failing to cover the spread. This success was, however, partially offset by the Lions earning a spot in the NFC Championship game for the first time since 1991, according to the firm.

HOW IT STANDS: BofA’s Q4 estimations indicate that FanDuel holds a 43% share, DraftKings at 36%, BetMGM (MGM) at 6%, and Penn at 5% in the online sports betting, or OSB, market. Penn, which introduced ESPN Bet in the middle of the quarter, achieved approximately a 10% share on a run-rate basis in November. However, this share slightly decreased to around 7% in December, the firm said. In the iGaming sector, FanDuel’s share increased by 3 percentage points quarter-over-quarter, reaching 26%, while DraftKings experienced a 1 percentage point increase, reaching a share of 27%.

EARNINGS RECAP: Las Vegas Sands posted fourth quarter earnings on Wednesday and the company noted enhanced conditions in Macau and Sigapore. “We were extremely pleased with our financial and operating results for the quarter, which reflect the ongoing improvement in the operating environment in both Macao and Singapore. We remain deeply enthusiastic about our opportunities for growth in both Macao and Singapore in the years ahead,” said Robert Goldstein, chairman and chief executive officer. “In Macao, the ongoing recovery across all segments continued during the quarter. Our decades-long commitment to making investments that enhance the business and leisure tourism appeal of Macao and support its development as a world center of business and leisure tourism positions us well as the ongoing recovery in travel and tourism spend progresses. “In Singapore, Marina Bay Sands once again delivered outstanding levels of financial and operating performance. Our new suite product and elevated service offerings position us well as airlift capacity continues to improve and the recovery in travel and tourism spending from China and the wider region continues to advance. “We are fortunate that our financial strength supports our ongoing investment and capital expenditure programs in both Macao and Singapore, our pursuit of growth opportunities in new markets, and the return of capital to stockholders. “We repurchased $505 million LVS shares under our share repurchase program during the quarter. We look forward to utilizing our share repurchase program to return excess capital to stockholders in the future. In addition, we entered into an agreement during the quarter to purchase approximately $250 million of Sands China stock, which, upon settlement of the agreement, is expected to increase our ownership interest in Sands China.” The company reported Q4 Macao adjusted property EBITDA of $654M and noted low hold on Rolling Play in Macao negatively impacted adjusted Property EBITDA by $40M. 

Wells Fargo lowered the firm’s price target on Las Vegas Sands to $64 from $65 and maintained an Overweight rating on the shares. The firm noted Las Vegas Sands reported in-line EBITDAR on a hold-adjusted basis, with favorable Singapore hold offsetting unfavorable Macau hold. Macau EBITDA is back to 88% of 2019 on solid margins as Macau’s recovery continues to buck China macro, Wells added.

ADDITIONAL ANALYST COMMENTARY: Susquehanna raised the firm’s price target on DraftKings to $49 from $42 and kept a Positive rating on the shares. The firm raised its target and estimates following its Q4 results; with the price income reflecting higher multiples from its comp set and estimates viewed as conservative.

Barclays analyst Brandt Montour raised the firm’s price target on Boyd Gaming (BYD) to $67 from $66 and backed an Equal Weight rating on the shares. The analyst prefers Las Vegas into the Q4 gaming prints, but says the setup “is net favorable” for digital and regionals as well.

Berenberg raised the firm’s price target on Flutter Entertainment to 17,000 GBp from 16,900 GBp and reiterated a Buy rating on the shares. Additionally, the firm lowered the firm’s price target on Entain to 1,310 GBp from 1,510 GBp and keeps a Buy rating on the shares.

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).