Sports Betting Stocks Retreat, But Analysts Say Catalysts Remain

Posted on: March 24, 2021, 12:17h. 

Last updated on: March 24, 2021, 01:15h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Sports wagering equities, including DraftKings (NASDAQ:DKNG), Flutter Entertainment (OTC:PDYPY), and Penn National Gaming (NASDAQ:PENN), are faltering Wednesday. Analysts don’t expect that scenario to last for long.

sports betting stocks
Traders on the floor of the New York Stock Exchange. Sports betting stocks are slumping, but that won’t last long, say analysts. (Image: NY Post)

Shares of FanDuel parent Flutter and DraftKings are off an average of two percent today, while Penn is off almost five percent. DraftKings and previously high-flying Penn reside seven and 24 percent, respectively, below their recently notched 52-week highs.

Citing the oft-mentioned total addressable market catalyst, Jefferies analyst David Katz sees a still mostly untapped spigot of potential business for the aforementioned companies and others.

Among active bettors, 40 percent have wagered over $50 in the past 12 months. We note that US sports betting remains in very early innings,” said Katz in a note to clients. “Roughly 41 percent of the US population have access to legalized sports betting, while only 27 percent with access to legalized OSB. With more states continuing to legalize and launch sports betting, we expect penetration will grow meaningfully over time.”

The analysts points out priorities for gamblers include promos/free play, pricing/odds integrity, and how easy it is to use an operator’s mobile app and website. Those factors bode well for DraftKings and FanDuel, he says.

Something to Total Market Talk

Jefferies isn’t the only research firm highlighting the potential expanse of the US sports betting market.

On Monday, Goldman Sachs said domestic online sports betting will morph from a $900 million industry today to $39 billion in 2033, delivering a compound annual growth rate (CAGR) of 40 percent along the way.

Those forecasts arrived after DraftKings estimated the US online sports betting market could be worth $22 billion in a few years, assuming 100 percent legalization. Today, 21 states and Washington, DC are homes to live and legal sports wagering. However, that group doesn’t include the “big three” of California, Texas, and Florida. Nor is New York — the fourth-largest state– among the states where online and mobile betting is permitted.

Catalysts Remain for Sports Betting Stocks

Sports wagering equities don’t lack for rebound opportunities. For example, states will deliver March gaming data in a couple of weeks, giving investors a glimpse into the impact of the NCAA Tournament. That event, which is one of the most wagered-on contests in the US, wasn’t played last year.

In an interview with CNBC, Penn National CEO Jay Snowden said two days of March Madness led to more bets on the Barstool Sportsbook app than the Super Bowl. Another catalyst for that operator is the looming debut of the Barstool app in Indiana and New Jersey. Snowden says it will be available in “a number” of new states prior to the start of the 2021 NFL season.

As for Flutter, it has its own way to spark upside for investors by spinning out its FanDuel business — the largest internet sportsbook operator in the US. The Irish company is considering that move. But it’s not immediately clear when it will occur.