Published on: September 26, 2024, 04:29h.
Last updated on: September 26, 2024, 04:29h.
They’re direct competitors, but when it comes to FanDuel parent Flutter Entertainment (NYSE: FLUT) and DraftKings (NASDAQ: DKNG), what’s good for one can benefit the other.
That was the case Wednesday when Flutter informed investors about the potential growth of the total addressable market for gross gaming revenue (GGR) in North America, projecting it to reach $70 billion by 2027. This forecast, which includes $63 billion attributed to the US, is 1.5 times higher than previous estimates and excludes the addition of new states into the iGaming or sports betting sectors. This positive outlook not only benefits FanDuel but also triggered a rally in DraftKings shares.
JPMorgan analyst Joseph Greff noted today that Flutter’s FanDuel projections could imply that DraftKings may generate up to $8.2 billion in revenue and $1.9 billion in cash flow by 2027.
“(FanDuel’s) positive scale commentary is favorable for DKNG and indicates that the sector is primarily a two-player competition,” stated the analyst. “We view this as a good investment opportunity and a fresh approach.”
FanDuel’s Impact on DraftKings
Flutter’s optimistic perspective on the North American market is crucial for DraftKings due to their dominant positions in the US, controlling over 70% of the market. This dominance has been reinforced during the first three weeks of the 2024 NFL season, with DraftKings and FanDuel jointly capturing 55% of all downloads of mobile sports betting applications, according to Eilers & Krejcik Gaming (EKG).
The boost in DraftKings’ stock following Flutter’s announcement has contributed to a surge that has lifted the stock by nearly 15% from its lowest point in August. Analysts believe that DraftKings can leverage similar catalysts that are benefiting FanDuel.
We anticipate DKNG will see comparable growth as the company enhances its parlay offering and as parlay betting becomes more mainstream over time,” mentioned Truist analyst Barry Jonas.
Jonas also highlighted Flutter’s strong international exposure, suggesting that DraftKings may explore opportunities outside the US in the future. He noted that FanDuel excels in risk management, particularly in pricing accuracy, which helps mitigate short-term result volatility.
Insider Selling at DraftKings
Despite the recent rally in DraftKings’ stock, some insiders have been selling their shares. A Form 144 filing with the Securities and Exchange Commission (SEC) revealed that co-founder Paul Liberman sold 643,654 shares on Sept. 25, generating proceeds of $26.39 million. This selling trend among insiders at the gaming company continues.
Liberman’s recent sale of DraftKings stock occurred after some of his restricted shares vested, and he also sold shares in August.
Some retail investors have expressed concerns about the insider selling at DraftKings, suggesting that these transactions are limiting potential gains for ordinary shareholders.