The Flutter Entertainment Bull Case: Are FanDuel And DraftKings A Sports Betting Duopoly?

DraftKings Inc DKNG and FanDuel, owned by Flutter Entertainment PLC FLUT, are “rapidly turning” into a sports-betting duopoly, Oppenheimer analyst Jed Kelly says.

Both companies exceed Wall Street expectations despite competition from PENN Entertainment Inc PENN and MGM Resorts International MGM, Kelly adds.

The Flutter Analyst: Kelly initiated coverage on Flutter with an Outperform rating and price target of $240.

FLUT Takeaways: Flutter is attractive given its high market share, Kelly said.

“In 1Q, FD/DK combined for ~70% and ~75-80% of US OSB handle and GGR share, and we are expecting these trends staying consistent over the next decade, especially if more states raise taxes,” the analyst said.

The analyst went on to discuss the struggles of several competitors.

“We highlight that BetMGM is consistently losing iGaming share in states with a land-based presence, CZR's [Caesars Entertainment Inc CZR] new iGaming product is not resonating at scale, and PENN is under an activist investor campaign to get out of digital after ESPNBet recently failed to gain even 5% industry share, following a heavy promotional period post the Barstool rebranding.”

In comparing FanDuel and DraftKings, Kelly believes that FanDuel has an advantage in trading and risk management while DraftKings has an advantage in customer acquisition costs.

Kelly cited state-level taxes on sports betting platforms, such as Illinois’s recent tax, as a key risk. However, the analyst believes that Flutter will be able to endure state taxes due to its operational strength. Furthermore, Kelly thinks that state taxes will hit smaller OSB players the hardest and accelerate FanDuel and DraftKings’ market share consolidation.

FLUT Price Action: Flutter traded at $191.04, up 1% at the time of writing.

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