Bet On It: Sportsbooks wary of Q4 outlook following unfavorable outcomes

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: In a regulatory filing, Boyd Gaming (BYD) president and CEO Keith Smith disclosed the sale of 40,000 common shares of the company on November 13 at a price of $73.49 per share.

Everi Holdings (EVRI) announced that its stockholders have voted at a special meeting of Everi stockholders to approve the pending simultaneous acquisition of Everi and the Gaming & Digital business of International Game Technology (IGT) by a newly formed holding company owned by funds managed by affiliates of Apollo Global Management (APO) through a merger. As previously announced, pursuant to the terms of the merger agreement, Everi stockholders will receive $14.25 per share in cash for every share of Everi common stock they own immediately prior to the effective time of the merger. Assuming timely satisfaction of necessary closing conditions, the proposed transaction is expected to close by the end of the third quarter of 2025.

Casino and restaurant mogul Tilman Fertitta, who just reported a 9.9% stake in Wynn Resorts (WYNN), is unhappy with the casino operator’s performance and share price, reported Bloomberg’s Christopher Palmeri, citing people familiar with Fertitta’s thinking. Wynn management isn’t doing an adequate job communicating performance to investors and Fertitta thinks there are opportunities to expand the Wynn brand, the sources told Bloomberg.

The Bragg Gaming (BRAG) board announced the strategic alternatives process in March with the formation of a special committee, comprised solely of independent members of the board. The committee, together with its advisors Oakvale Capital LLP and Blake, Cassels & Graydon LLP, evaluated a wide range of strategic alternatives for maximizing shareholder value including a potential sale or merger of the Company. Bragg solicited interest from a significant number of potential counterparties and received multiple non-binding proposals. After careful consideration, the board, on recommendation from the special committee, unanimously determined that none of the proposals received reflect the company’s intrinsic value or current and projected financial performance, and therefore elected to conclude its review and disband the special committee.

Flutter Entertainment (FLUT) announced that it has entered into non-discretionary arrangements with Goldman Sachs to repurchase ordinary shares on Flutter’s behalf for an aggregate maximum consideration of up to $350M on the New York Stock Exchange. The buyback will commence November 14 on the New York Stock Exchange, and will end no later than March 31, 2025.The purpose of the buyback is to reduce the share capital of Flutter. This buyback is the first tranche of the share repurchase program of up to $5B authorized by the board as announced on September 25. The maximum number of ordinary shares which may be acquired pursuant to the Buyback is 17,739,905.

EARNINGS RECAP: Brag Gaming reported third quarter earnings, surpassing last year’s mark in terms of EPS and revenue. Matev Mazij, CEO for Bragg, commented, “The third quarter marked another period of strong growth and record results for Bragg. Revenue grew 16% year-over-year, gross profit increased 18%, and Adjusted EBITDA rose 7%. In the U.S., strong third quarter revenue gains from content distribution helped drive a 40% global increase in proprietary online content revenue year-over-year.” The company reiterated its full-ear 2024 outlook and provided some insight into 2025. The company said, “Bragg is actively advancing a robust pipeline of opportunities that is anticipated to drive strong momentum as we enter 2025. The outlook for 2025 remains positive, with expectations of sustained double-digit top line growth, expanding bottom line margins, and increased operational leverage, further strengthening Bragg’s position in the market.”

Gambling.com (GAMB) released its Q3 earnings this week beating analyst estimates and slightly tweaking its FY24 guidance. The company noted its progress in its goal to achieve $100M in annual EBITDA. “Our record third quarter and year-to-date results reflect our best-in-class execution in the affiliate sector to consistently grow market share around the world,” commented Charles Gillespie, CEO and co-founder of Gambling.com. “The third quarter’s strong revenue growth and record Adjusted EBITDA highlights Gambling.com Group’s position as an industry leader in creating value for both our shareholders and our online gambling operator clients. To complement our continued organic market share growth, we continue to evaluate opportunities adjacent to the core business to expand our footprint in the online gaming ecosystem as we progress towards our goal of $100 million in annual Adjusted EBITDA.” Truist raised the firm’s price target on Gambling.com to $16 from $13 and backed a Buy rating on the shares. The company’s Q3 EBITDA came in well ahead of consensus on NDC – new depositing customers – growth and resiliency in North Americe, while its 2024 guidance was raised again, the analyst told investors in a research note. Gambling.com management also remains confident in reaching its $100M annual EBITDA target, before any M&A upside, the firm added.

Flutter also blew by analyst consensus in the third quarter highlighting a fast start to the NFL season. Peter Jackson, CEO, commented: “Flutter had an excellent quarter with revenue growth accelerating to 27%, well ahead of market expectations, and increases to our revenue and Adjusted EBITDA guidance for 2024. In the US, we had a fantastic start to the new NFL season with peak wagers per minute already higher than Super Bowl LVII. Our proprietary product offering continued to drive strong parlay penetration as well as a step up in live betting handle. Outside of the US, all divisions delivered a strong performance in the quarter as they leveraged the benefits of the Flutter Edge. In UKI, a broader product range across both sports and iGaming drove player and revenue growth. Sisal continued to make significant share gains in Italy as we look to expand our presence there with the addition of Snai. In Australia, Sportsbet has been demonstrating encouraging trends. On September 25, we hosted our Investor Day where we outlined how we are an ‘and’ business, with opportunities to deploy capital organically and in M&A, such as the Snai and NSX acquisitions, and also in shareholder returns. We believe that the Group has exciting growth prospects due to our unparalleled leadership positions across the world, underpinned by access to the Flutter Edge. We expect to have significant capital to deploy over the coming years and I am excited to commence the share repurchase program in Q4.” Despite the Q3 beat, the company did tweak its FY24 adjusted EBITDA view slightly lower. Needham increased its price target on Flutter to $300 from $270 and reiterated a Buy rating on the shares after its Q3 earnings beat. The company’s U.S. results in the quarter were better than feared, which the management attributed to best-in-class risk and trading, and Flutter is leaning in on this competitive advantage with their recently launched Your Way product, the analyst noted.

Light & Wonder (LNW) fell short of expectations in Q3 with gaming revenue gaining 15% in the period. The company said, “We maintained strong momentum in the third quarter and delivered our 9th consecutive quarter of double-digit consolidated revenue growth year-over-year, sustainable cash flow generation and returned $44 million to shareholders through share repurchases, while continuing our advancement toward our long-term financial targets. Consolidated revenue increased 12%, driven by strong performance across all our businesses, maintaining healthy earnings growth.”

Genius Sports (GENI) experienced a beat and raise quarter in Q3 boosting its FY24 adjusted EBITDA and revenue outlooks. “Our strong results are underpinned by our successful commercial execution, positioning us to capture profitable growth alongside our partners as the sports betting industry continues to evolve and expand,” said Mark Locke, Genius Sports co-founder and CEO. “We are empowering partners across the sports ecosystem to better reach, engage, and monetize fans using our innovative technology and unique data-driven insights.” Needham elevated the firm’s price target on Genius Sports to $12 from $9 and reaffirmed a Buy rating on the shares. The firm cited the company’s Q3 earnings beat and better than feared Q4 guidance, stating that Genius Sports is in the right place at the right time, outperforming strong total addressable market growth with U.S. and Europe contract renewals driving accelerating revenue, the analyst said.

THE TIDE TURNS: Sportsbooks took a cautious approach to their Q4 outlooks after weeks of unfavorable sports outcomes, according to Canaccord. DraftKings reported a $175M EBITDA headwind for the quarter, citing the most customer-friendly stretch of NFL results in its history. Similarly, Penn Entertainment (PENN) opted not to reflect its Q3 Interactive EBITDA beat in its FY24 guidance. This conservative positioning leaves room for potential upside if conditions improve for operators before the end of the year. The weekend provided a positive start, with six underdogs winning outright in NFL week 10—including one of the five largest—and 11 of 14 underdogs covering the spread, the highest number all season. Additionally, sportsbooks likely benefited from a low-scoring week, as 10 games fell below their projected totals, including three of four prime-time matchups. In New York, the first state to report October sports betting data, total handle increased approximately 16% year-over-year to $2.3B. However, total gross gaming revenue, or GGR, grew just 6% year-over-year to $176M, reflecting the impact of customer-friendly NFL outcomes. Betting volumes remained strong despite this being the third football season with online sports betting in New York. For the week ending November 3, total handle grew 17% year-over-year to $558M, while GGR increased 38% year-over-year to $52<, indicating mixed results for sportsbooks. FanDuel continued to extend its lead in New York by handle share, reaching 41% compared to DraftKings' 33%. Fanatics also made gains, with its market share increasing by 550 basis points year-over-year to 7%. FanDuel's industry-leading hold percentage helped maintain its top position in GGR share at 51%, followed by DraftKings at 32%, according to Canaccord.

ONE YEAR MARK: In November 2023, the Seminole Tribe began a phased rollout of mobile sports betting in Florida, making it easier for users to place wagers on teams through a smartphone app, Talia Blake of Central Florida Public Media wrote. This launch followed a two-year delay caused by legal disputes over the Tribe’s agreement with the state. The legal standoff between the Seminole Tribe and the ‘West Flagler Parties’ finally ended with a settlement that included a partnership to feature and promote Jai Alai on the Hard Rock Bet, the only app legally approved for sports betting in the state. The end of that lawsuit means there’s nothing standing in the way of mobile sports betting continuing in Florida, according to Keith Buckley, business and sports management professor at Rollins College and the school’s head soccer coach. “This relationship is set until 2050 so for the next 25 years, at least, it’s pretty much going to be run by the Seminole Tribe,” he said to Central Florida Public Media. “And quite frankly, the expectation from taxes and revenues will be quite high. I would expect, as the revenues get higher, for there to be more lawsuits with people wanting to get a part of the action, for no better term.” Before the start of mobile sports betting in Florida, Buckley told Central Florida Public Media that an expected $2 billion in bets would pass through the Sunshine state each month. Now, he commented, although there’s still a sizable illegal betting market, people in the state are exceeding expectations for legal bets. “The expected revenues, I think, is going to be about $13 billion in profits, and the expectation of the betting revenues over the next 10 years in Florida alone is very significant,” he said. It’s challenging to put a number on how many people are legally betting in Florida, as the Seminole Tribe has yet to release data that shows how many of its app users are actually placing bets. “What we do know is that it’s a very vibrant industry that we know anecdotally that people are using it,” he said. “And as we go through the college football and the NFL football season right now is extremely popular.”

ADDITIONAL ANALYST COMMENTARY: Truist elevated the firm’s price target on Gambling.com to $16 from $13 and reiterated a Buy rating on the shares. The company’s Q3 EBITDA came in well ahead of consensus on NDC – new depositing customers – growth and resiliency in North Americe, while its 2024 guidance was raised again, the analyst tells investors in a research note. Gambling.com management also remains confident in reaching its $100M annual EBITDA target, before any M&A upside, the firm added.

Mizuho cut its price target on Gaming and Leisure Properties (GLPI) to $51 from $52 and maintained a Neutral rating on the shares as part of a broader research note. The firm is turning less constructive on Tripe Net REITs as expectations of higher inflation and a “higher for longer” rate environment should weigh on the sector’s investment spreads and growth potential, marking the end of the “pivot party”, the analyst tells investors in a research note.

BofA hiked the firm’s price target on Flutter Entertainment to $310 from $300 and reassessed a Buy rating on the shares. Following Flutter’s Q3 report last night, the firm now has stronger outer year estimates, with its 2026 EBITDA raised 3%, or 11% above consensus, but notes that its 2024/25 view is largely unchanged. Flutter repeated its 20%-25% FanDuel revenue growth expectation, but “this looks conservative,” the analyst tells investors.

Benchmark boosted its price target on Genius Sports to $11 from $10 and backed a Buy rating on the shares. Genius delivered “strong” Q3 results, with substantial revenue and profitability growth, alongside expanding margins, the analyst contended. The firm is confident in the company’s 2025 growth potential and ongoing margin expansion, the analyst added in a post-earnings note.

BofA resumed coverage of Penn with a Neutral rating and $22 price target after moving from No Rating. The firm thinks Penn has returned to trading on fundamentals and sees the risk-reward as balanced. The firm sees estimate risk, but thinks Penn is moving past peak losses, the analyst told investors.

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).