Wall Street Analysts Bullish on FanDuel and DraftKings’ Long-Term Potential

According to Wall Street analysts, investors are increasingly considering FanDuel and DraftKings as major players in the sports betting and iGaming sectors. 

FanDuel and DraftKings Lead the Pack in New York’s Sports Betting Market

David Katz of Jefferies Equities Research said that FanDuel and DraftKings had been the center of attention for investors, especially in New York.

Katz stated that FanDuel, a Flutter Entertainment brand, has retained its lead in New York’s gross gaming revenue (GGR), accounting for 47% compared to DraftKings’ 36%. Although Flutter grew at 27% while DraftKing grew at 45%, FanDuel is still ahead. Both firms enjoy rational promotional environments and favorable margins which should drive their stocks up over time, according to Katz. Flutter appears to be the favorite among investors due to strong performance data but both companies are adjusting to Illinois’ recent tax hike.

Illinois raised its maximum tax rate on online sports betting companies from a 15% flat rate to 40% effective July 1. This impacted stock prices for both Flutter and DraftKings. However, Flutter’s stock closed above $200 on July 8 which was its highest point since May. After reaching over $46 in mid-May before dropping below $30 in June and then rising above $38 now seems a good time for DraftKings shares, too.

Flutter and DraftKings Expected to Thrive Amid Industry Growth

According to Hedgeye analyst Sean Jenkins, stocks of Flutter Entertainment and DraftKings are expected to become attractive long-term investments as the sports betting industry grows. These leaders will continue to succeed under current market conditions, therefore, soon their top lines may grow faster than ever due to a change in focus toward future growth.

Jenkins also said that taxes recently changed by Illinois could have negative effects on stock prices if investors have not already considered them but still previous forecasts by analyst Stephen Grambling and his team at Morgan Stanley expect DraftKings to remain resilient despite these challenges. 

Additionally, Jenkins recommended looking beyond Q2 results for Flutter (expected August 13) and DraftKings (expected August 1), both of which should report earnings soon. In terms of broader markets Jeff Stantial at Stifel says DraftKings is one of his top picks going into this earnings season through H2 2024.

The analyst blamed some weakness seen lately in its shares on an Illinois tax hike and revised EBITDA estimates while still expressing confidence about free cash flow improvement prospects at DraftKings going forward. He has a $50 price target for the company versus Jefferies’ $54.