A higher than average amount of NFL betting favorites won games in the 2024 season, which could be bad news for sportsbooks like Flutter Entertainment FLUT owned FanDuel and others.
Flutter calls out one Detroit Lions game as being particularly painful, while an analyst says revised guidance has often been a time to buy sportsbook stocks.
Lowered Guidance: On Tuesday, Flutter Entertainment announced it was lowering its full-year guidance due to what it called customer-friendly results from U.S. sports.
"Continued strong U.S. player momentum has been offset by a period of very unfavorable U.S. sports results across the remainder of November and in December, primarily on NFL Parlay and Same Game Parlay outcomes," Flutter said.
The sports betting company said the 2024 NFL season has been the "most customer-friendly" since the launch of online sports betting, with the highest rate of favorites winning in nearly 20 years.
Flutter said the results reduced revenue by $390 million and adjusted EBITDA by $260 million for the Nov. 12 to Dec. 31 period, which is part of the fiscal fourth quarter. Overall fourth-quarter U.S. sports revenue saw an adverse impact of $550 million in revenue.
The company shared that US revenue is now estimated to be $5.78 billion for the full year, compared to previous guidance of $6.05 billion to $6.25 billion. U.S. adjusted EBITDA is now forecasted to be $505 million compared to prior guidance of $670 million to $750 million.
Parlays are often beneficial for sportsbooks as they include combining multiple bets into one bet that needs all elements to come true for the bet to pay out. While these bets can result in larger payouts, they have a lower hitting percentage. Parlays being unfavorable for Flutter could be something for investors to keep an eye on going forward.
While the full 2024 NFL season had many favorites win, one team and one game might have had the biggest impact on the quarter.
The footnotes of Flutter's press release mention that they had "significant adverse results occurring on Dec. 30."
There was only one NFL game played on Dec. 30 with the Monday Night Football matchup between the Detroit Lions and San Francisco 49ers. The Lions were 3.5-point favorites against the 49ers and won the game 40-34, covering the spread.
According to sports betting writer Ben Fawkes, 91% of tickets and 94% of money at FanDuel was on the Lions -3.5 for the game. This could explain why the company saw such a negative result for this particular game.
The Lions ended the 2024 season with a 15-2 overall record and were 12-5 against the spread, tied for best ATS with the Denver Broncos and Los Angeles Chargers for the season.
Heading into the NFL Playoffs, the Detroit Lions are now the favorites to win Super Bowl LIX at odds of +320 at FanDuel. Back in February, the Lions had odds of closer to +1,200, which means FanDuel could be rooting against the Lions again depending on how many futures bets it has open on the NFL team.
FanDuel will report fourth-quarter financial results on March 4 and provide formal guidance for 2025, events that come after the completion of the NFL Playoffs and Super Bowl.
Read Also: How To Watch NFL Playoffs, Super Bowl LIX Betting Odds: Will History Be Made By Chiefs Or Lions?
Flutter Analyst Ready To Buy The Dip?: Flutter preannouncing lower guidance was expected, Needham analyst Bernie McTernan said in a new investor note.
The analyst has a Buy rating and $300 price target on Flutter Entertainment.
"We expect structural hold and line accuracy to continue to be a debate among investors, however, we note the '24 season had the highest percent of favorites winning in nearly 20 years," McTernan said.
McTernan notes that historically lower guidance revisions from sportsbooks has "been a buying opportunity."
The analyst is hesitant to recommend buying the dip due to the timing of the guidance revision with governors proposing fiscal budgets, which can be risky for online sports betting tax increase announcements.
"At this point we continue to believe the '24 season for the NFL was bad luck for the sportsbooks given the historic performance by the favorites."
McTernan recommends waiting to buy the dip until after fiscal budgets are set, which often comes by the end of February.
FLUT Price Action: Flutter stock is up 1% to $254.50 on Wednesday versus a 52-week trading range of $174.03 to $284.79.
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Photo: Shutterstock
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