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Sports Betting Stocks Remain Flat In March

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Each month, our “Stock Watch” series examines recent trends in sports betting equities across Wall Street and outside the U.S. on top global exchanges. The red-hot U.S. sports betting market is expected to grow to nearly $40 billion in annual revenue by 2033, according to Goldman Sachs. One prominent investment manager, Cathie Wood of Ark Invest, has taken a large position in DraftKings. She is not alone, as a wide range of institutional investors are bullish on sports betting. Come here early each month for a review of stock moves among the top publicly traded companies in the sports betting space.

After enduring an 18-month roller coaster of extreme volatility, top sports betting stocks took a pause in March.

Despite March Madness, the largest multi-week event on the annual sports wagering calendar, top names in the space largely remained flat in the third month of 2023. DraftKings closed March at $19.36, increasing by a modest 2.5%. But had the month ended one day earlier, DraftKings would have posted fractional gains of a mere 3 cents on the month.

MGM Resorts, which owns a 50% stake in BetMGM, also rose slightly in March, ending the month at $44.42 per share. By the same token, had the month ended on March 30, MGM would have gained 33 cents per share for the period, an increase of less than 1%.

The two companies represent two-thirds of a triumvirate that controls approximately 80% of the market share in the U.S. sports betting industry. FanDuel, the definitive leader of the trio, is owned by U.K.-based conglomerate Flutter. In some U.S. jurisdictions, the three heavyweights control closer to 90% of the market share. As the U.S. sports betting industry consolidates sooner than expected, stock analysts have focused more intently on the three leaders.

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A calm March closed an encouraging quarter for leading stocks in the industry. Following a strong opening month, top sports betting stocks received a bump in February during earnings season. Over the period, prominent sportsbooks provided indications that they expect profitability by 2024, partially assuaging investor concerns that the operators cannot emerge out of the red. DraftKings, which fell upward of 80% at 2022 lows, has rebounded somewhat this year.

In February, DraftKings topped $21 a share, reaching its highest level in seven months. As of Thursday, DraftKings is up more than 60% year-to-date.

DraftKings (DKNG)

Opening price on March 1: $18.88

Closing price on March 31: $19.36

Monthly percent gained or lost: 2.5%

YTD change: 63.7% (as of April 12)

Market cap: $8.7 billion (as of April 12)

DraftKings shareholders are scheduled to vote on three proposals May 15 when the company holds its annual shareholders meeting. The proposals include one that will ask shareholders to approve compensation plans of five DraftKings executives in 2022. The vote, which will be held on a non-binding advisory basis, is expected to pass. CEO Jason Robins, who holds total voting power on about 90% of available shares, has indicated that he plans to vote for the proposal, DraftKings wrote in an SEC filing.

In the same filing, DraftKings listed 19 companies in a peer group for benchmarking its compensation decisions in 2023. In the peer group, DraftKings replaced Twitter and Slack with two gaming companies in PENN Entertainment and Light & Wonder.

DraftKings has faced criticism for its executive compensation decision making, given that the company has yet to report a single quarter of profitability. Despite remaining in the red, DraftKings had total stock-based compensation of $683.3 million in 2021, the company disclosed in public filings. Robins received $47.5 million in total compensation in 2022, $43.7 million of which came from stock awards.

In February, DraftKings indicated that it expects to become profitable in the fourth quarter of this year, before generating full-year positive adjusted EBITDA for 2024.

Flutter Entertainment (FLTR.L)

Opening price on March 1: £13,370 pence

Closing price on March 31: £14,630 pence

Monthly percent gained or lost: 9.42%

YTD change: 30%

Market cap: $26.1 billion (as of April 12)

Flutter announced in late March that the company plans to move forward with a resolution to pursue a dual U.S. stock listing. The resolution requires approval from 75% of votes cast by shareholders at the company’s annual shareholders meeting. The meeting will be held on April 27 in Dublin.

Ahead of the meeting, reports surfaced that Flutter is in advanced talks to appoint U.S.-based executive John Bryant as its next chairman. Bryant, a former executive at Kellogg’s, would replace Gary McGann, who joined the board in 2014. The recruitment of a U.S. executive would support the company’s plans for an additional listing in the U.S.

Previously, Flutter described a U.S. listing as an opportunity to realize the “long-term strategic and capital market benefits” resulting from the growth of the U.S. sports betting market. During the fourth quarter of 2022, FanDuel had a 50% share of the U.S. online sports betting market, the company noted.

MGM Resorts (MGM)

Opening price on March 1: $43.00

Closing price on March 31: $44.42

Monthly percent gained or lost: 3.3%

YTD change: 27.7% (as of April 12)

Market cap: $16.2 billion (as of April 12)

Other stock movement

Among sports betting data providers, Sportradar lost about 5% in March, closing the month at $11.63 per share. Sportradar fell sharply on March 15 after the Switzerland-based company reported 2022 total profits of €10.5 million ($11.1 million), down 18% from the previous year.

Sportradar also generated 2022 revenue of €730.2 million ($781.3 million), driven by a favorable performance in its U.S. segment, which delivered year-over-year growth of 78%. After falling below $10 a share in mid-March, Sportradar rebounded over the final week of the month.

Genius Sports, meanwhile, rose about 3%, closing March around $5 a share. During the fourth quarter of 2022, Genius saw group revenue jump 25.4% to $105.3 million. Still, Genius’ net loss for the quarter widened to $127.7 million, up 129.7% compared with $53.3 million in the same quarter a year earlier.

For fiscal year 2022, Genius reported an increase of 18.1% in revenue from its betting technology, content, and services segment to $209.3 million. Genius has an exclusive sports betting data partnership with the NFL, while Sportradar maintains a multi-year partnership with the NBA.

Small moves among mid-sized operators

Last week, Major League Baseball filed an emergency motion in a Texas bankruptcy court that is overseeing the restructuring process of Diamond Sports Group. DSG, the nation’s largest regional sports network, has rights deals with 14 MLB teams through Bally Sports. Major League Baseball has urged DSG to pay the Cleveland Guardians and Minnesota Twins for their local TV rights or release the teams from their contracts.

When Diamond Sports Group filed for Chapter 11 bankruptcy on March 14, the company stated that Bally’s RSNs would continue to operate in the “ordinary course of business” during the bankruptcy process. Amid financial difficulties, Bally’s has shuttered daily fantasy sports operator Monkey Knife Fight and has taken a large impairment charge on the acquisition of sports betting platform bet.works. Bally’s closed March down moderately at $19.52 a share. In the midst of MLB spring training, Bally’s opened the month around $20.

Also in March, Rush Street Interactive and the Connecticut Lottery Corporation mutually agreed to wind down an online and retail sports betting partnership later this year. The news had little effect on Rush Street’s stock price, which closed the month at $3.11 per share. The departure may have positive implications for Rush Street, allowing the company to shift resources to other states that are focused on legalizing iGaming, JMP Securities analyst Jordan Bender wrote in a research note. Rush Street is the parent company of BetRivers and PlaySugarHouse Sportsbook.

 

In Australia, PointsBet continues to hover in the low single digits amid merger speculation. On the Australian Stock Exchange, PointsBet closed March at A$1.22 per share (U.S. $0.83). Reports surfaced in mid-March that Tabcorp, Australia’s largest gaming operator, had engaged in preliminary discussions with PointsBet to acquire the company’s Australian business.

PointsBet’s Australian assets have also drawn interest from U.K.-based Entain and News Corp.-backed Betr, the Australian Financial Review reported. Betr is a different entity than the U.S.-based microbetting operator that goes by the same name. While PointsBet’s U.S. assets are not part of the rumored deal, the divestiture of the Aussie business would allow the company to sharpen its focus on growth in North America.

The Roundhill Sports Betting & iGaming ETF (BETZ), an exchange-traded fund (ETF) that tracks the top sports betting and iGaming stocks in the industry, ended the month at $16.24, down 0.08%. The small losses underscore the lack of movement among sports betting stocks in March. DraftKings and Flutter are the top two holdings in the fund, each representing approximately 7% of the portfolio.

BETZ hit a record high of $32.65 in April 2021, illustrating the appetite for online betting throughout the COVID-19 pandemic. At that point, the ETF more than doubled the level from its June 2020 debut.



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