The books approach the NFL season with discipline


Each month, our “Stock Watch” series examines recent trends in sports betting stocks on Wall Street and outside the United States on major global exchanges. According to Goldman Sachs, the booming US sports betting market is expected to reach nearly $40 billion in annual revenue by 2033. A prominent investment manager, Cathie Wood of Ark Invest, took a prominent position in DraftKings. She is not alone, as a wide range of institutional investors are bullish on sports betting. Come here at the start of each month for a review of stock moves among the top publicly traded companies in sports betting.

Sports betting stocks rose in August to their summer high before falling back towards the end of the month as long-term inflation concerns persisted.

There are few signs that US inflation will decline in the near term. The US Bureau of Labor Statistics announced on Tuesday that its consumer price index for August increased by 8.3% over the previous year and 0.1% from July, defying expectations of weaker increases in both categories. As a result, the three main stock market indices each suffered their worst day since june 2020, with the S&P 500 down 4.3% on the session. Inflation is weighing heavily on tech stocks, which have similar characteristics to a number of top-tier sports betting stocks.

Major gambling companies were not spared on Wall Street, as DraftKings and MGM Resorts fell more than 4%. The selloff erased any momentum gained since the opening week of the NFL season when several high-profile play stocks rose. Last week, the NFL opened its second season since the launch of the league’s official sports betting program, highlighted by an exclusive partnership with sports betting data provider Genius Sports. The multi-year deal is valued at more than $1 billion over the life of the contract.

Investors look to sports betting operators to spend wisely on customer acquisition while controlling sales and marketing spend. Among the major sportsbooks, Caesars Entertainment will be closely watched. When Caesars completed its acquisition of William Hill in August 2021, the company made waves by pledging to spend $1 billion to grow its renowned online division. But after a costly campaign last fall, Caesars abruptly pulled a popular commercial featuring the Manning family and actor JB Smoove after the Super Bowl.

Although Caesars Digital reported a net loss of nearly $700 million in the first half of the year, CEO Tom Reeg was pleased with the company’s cost-cutting efforts as the digital unit cut about $250 million from its long-term budget forecast. Reeg doesn’t expect the division to lose another $100 million in a single quarter. The Street reacted positively to Reeg’s comments, as Caesars shares rose moderately in response.

Since Caesars established the market with the aggressive campaign, analysts will be watching the company’s spending habits closely during the NFL season. Sportsbooks that keep their market share, without spending money on ads and promotions, are likely to be the winners. After a long hibernation, the Mannings and Smoove returned to the airwaves for a new Caesars Sportsbook commercial last week.

Speaking of promotions, for the week ended September 10, promotional activity among a group of traders tracked by Susquehanna Financial Group increased 19% from the first week of September. The promotional activity of these sportsbooks is still down about 58% from last year at this time. Promotional spending patterns have also changed somewhat, according to Susquehanna, with operators focusing more on boost bets for certain bets such as parlays rather than distributing free bets.

With a less promotional environment, there is an increased likelihood that gross margins will exceed Wall Street expectations, Susquehanna analyst Joe Stauff wrote in a research note Tuesday. Shaun Kelley, analyst at BofA Global Research, echoed the sentiments, describing the promotional environment as more rational this NFL season. There are indications, he said, of a pullback in spending on traditional media coupled with a move towards performance-based channels.

In general, sports betting stocks continue to rebound after many companies fell more than 70% from their 52-week highs earlier this year.

Draft Kings (DKNG)

Opening price August 1: $13.58

Closing price on August 31: $16.06

Monthly percentage gained or lost: 18.3%

Change since the start of the year: (-42.3%)

Market cap: $7.8 billion (as of September 14)

While DraftKings remains below $20 per share, Wood, the CEO of Ark Invest, continue to invest heavily in stock. It’s a positive sign for DraftKings investors after a tense period this summer when the stock fell below $10, falling to an all-time low. This week, DraftKings announced a deal with Amazon become the exclusive odds provider for Thursday night football. Amazon Prime opens a 15-game weekly package Thursday when the Kansas City Chiefs take on the Los Angeles Chargers.

Flutter Entertainment (FLTR.L)

Opening price August 1: £8,222.00 pence

Closing price on August 31: £10,765.00 pence

Monthly percentage gained or lost: 23.6%

Change since the start of the year: (-8.4%)

Market cap: $18.3 billion (as of September 14)

Flutter, the parent company of FanDuel Sportsbook, enters the football season in a comfortable position. During last month’s quarterly earnings call, Flutter said FanDuel has a whopping 50% share of the online sports betting market in the United States. FanDuel also became the first major US bookmaker to make a full quarter profit. Going forward, FanDuel is focused on expanding its market share within its online casino segment. Flutter also expects arbitration proceedings over the fair market value of Fox Corporation’s minority stake in FanDuel Group to conclude in late October.

MGM Resorts (MGM)

Opening price July 1: $32.52

Closing price on July 29: $32.64

Monthly percentage gained or lost: 0.01%

Change since the start of the year: (-27.8%)

Market cap: $13.3 billion (as of September 14)

Other stock movements

While PENN Entertainment fell 6% on Tuesday in line with the broader market sell-off, the company is still trading around $30 per share. Prior to the recent decline, the PENN broke above $38 in mid-August, hitting its highest level in three months.

While PointsBet peaked above AU$4.00 per share in mid-August, the Australia-based company is now back below AU$2.30.

Among sports betting data providers, Sportradar traded at over $10 a share on Wednesday, producing a market capitalization of over $3 billion. It soared as much as 32% in August to hit a monthly high of $14.56 before closing the month at $11 per share. Genius Sports, meanwhile, was trading around $4.30 on Wednesday, remaining near three-month highs. Genius jumped more than 60% in August following positive results.

The ETF Roundhill Sports Betting and iGaming (BETZ), an exchange-traded fund (ETF) that tracks the best sports betting and iGaming stocks in the industry, closed August at $15.23, down slightly on the month. At one point in August, the ETF eclipsed $17.50, its highest level in two months.

BETZ is still well below levels of an all-time high of $32.65 in April 2021. At this point, the ETF has more than doubled its level since its June 2020 debut. On Tuesday, DraftKings, Flutter and Genius Sports ranked among the top three holdings in the portfolio, with each stock representing more than 5% of the overall basket.


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