They are direct rivals; however, regarding FanDuel's parent company Flutter Entertainment (NYSE: FLUT) and DraftKings (NASDAQ: DKNG), what benefits one can also help the other.
On Wednesday, Flutter informed investors that it expects the total addressable market for gross gaming revenue (GGR) in North America to grow to $70 billion by 2027. The projection contains $63 billion linked to the US, which is 1.5 times greater than the operator's previous estimates and does not factor in the incorporation of new states into the iGaming or sports betting markets. That’s positive for FanDuel, but the forecast also triggered a rise in DraftKings’ stock.
In a note to clients today, JPMorgan analyst Joseph Greff mentioned that utilizing Flutter’s FanDuel forecasts for DraftKings suggests that DraftKings might achieve as much as $8.2 billion in revenue and $1.9 billion in cash flow by 2027.
“(FanDuel’s) upbeat scale commentary is positive for DKNG and suggests the sector is really a two-horse race,” observed the analyst. “We like it (the stock) here and see it as somewhat contrarian and a fresh money idea.”
FanDuel Perspective Contributes to DraftKings Surge
Flutter’s insightful remarks regarding the North American market are relevant to DraftKings for an additional reason. In the United States, that company and FanDuel dominate the market with a duopoly, controlling over 70% of it. That ranking has been confirmed over the initial three weeks of the 2024 NFL season, as DraftKings and FanDuel together accounted for 55% of all mobile sports betting app downloads, as reported by Eilers & Krejcik Gaming (EKG).
DraftKings' rise following the Flutter announcement contributed to a spike that has led the stock to increase nearly 15% from its lows in August. Experts think DraftKings could gain from several of the same factors that are enhancing FanDuel.
"We believe DKNG should see similar upside as the company continues to improve its parlay offering and parlay betting becomes more mainstream over time,” wrote Truist analyst Barry Jonas in a report.
He mentioned that Flutter’s significant presence outside the U.S. might push DraftKings to seek opportunities abroad in the future, and emphasized that if FanDuel excels over its competitor in any area, it is in risk management, as FanDuel’s expertise in pricing accuracy “contributes to reducing fluctuations in short-term outcomes.”
DraftKings Insiders Continue to Sell
Although DraftKings stock has surged in the last month, certain insiders have capitalized on that momentum by selling. A filing of Form 144 with the Securities and Exchange Commission (SEC) revealed that on September 25, co-founder Paul Liberman sold 643,654 shares, generating total proceeds of $26.39 million. This maintains a pattern of excessive insider selling at the gaming firm.
Liberman sold DraftKings stock following the vesting of some of his restricted shares in the company. He sold shares as well in August.
Certain retail investors have criticized the amount of insider selling occurring at DraftKings, asserting that these transactions are hindering additional gains for regular shareholders.