Wall Street Analysts Predict Further Growth for FanDuel and DraftKings

Wall Street analysts have said that investors are increasingly viewing FanDuel and DraftKings as leading companies in the sports betting and iGaming industries.

Positive outlook for FanDuel and DraftKings.

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David Katz from Jefferies Equities Research noted that FanDuel and DraftKings have attracted significant interest from investors, particularly in New York.

FanDuel, one of the brands from Flutter Entertainment, has kept its position as leader of the pack in New York in regards to gross gaming revenue (GGR), securing 47% compared to DraftKings’ 36%. Despite Flutter’s 27% growth rate versus DraftKings’ 45%, FanDuel remains ahead.

Both companies benefit from rational promotional strategies and favorable margins, which are likely to boost their stock values over time, according to Katz. While Flutter is preferred by investors due to its strong performance metrics, both firms are adjusting to a recent tax increase in Illinois.

Illinois Tax Rate Increased by 25%

Starting July 1, Illinois raised its maximum tax rate on online sports betting companies from a flat 15% to 40%, which had an impact on stock prices for both Flutter and DraftKings. Flutter’s stock hit over $200 on July 8, its highest since May. Meanwhile, DraftKings’ shares rose above $38 after peaking at over $46 in mid-May and then dipping below $30 in June.

Hedgeye analyst Sean Jenkins anticipates that stocks of Flutter Entertainment and DraftKings will become attractive long-term investments as the sports betting industry expands. These market leaders are expected to continue thriving under current conditions, with the potential for accelerated top-line growth due to a strategic focus on future opportunities.

Jenkins mentioned that the recent tax changes in Illinois might negatively impact stock prices if investors have not already accounted for them. Nevertheless, earlier projections by analyst Stephen Grambling and his team at Morgan Stanley suggest DraftKings will stay resilient despite these challenges.

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Strong Earnings Expected in H2

Jenkins also advised considering earnings reports beyond Q2 for Flutter (expected August 13) and DraftKings (expected August 1), as both companies are set to release their results soon. In broader market terms, Jeff Stantial at Stifel has named DraftKings as one of his top picks for the earnings season through H2 2024.

Stantial attributed recent share weaknesses to the Illinois tax hike and revised EBITDA estimates but remains confident about DraftKings’ future free cash flow improvement prospects. He has set a $50 price target for the company, compared to Jefferies’ target of $54.


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