Morgan Stanley last week picked DraftKings stock (DKNG) and Flutter stock (FLTR) as the “best ways” to invest in the growth of sports, media and sports betting.
The 56-page report called out three value drivers surrounding sports and sportsbooks like DraftKings and FanDuel:
- Rising consumer engagement and spending in both goods and experiences, which is amplified by sports betting
- Global competition between media and tech distributors for exclusive rights to sports
- Scarcity value for professional team franchises
Sports broadcasting rights could go multiple ways with both broadcasters and tech companies like Amazon and Netflix interested. The bid from traditional TV broadcasters may not be as strong as in the past, given cord-cutting rates, MS said.
DraftKings, Flutter stock ‘long-term winners’
There will be between 20 million and 30 million online sports bettors by 2025, with DraftKings ($25.66 at Thursday’s close) and FanDuel (Flutter closed at £157.50 on Thursday) representing more than 10 million monthly users each, MS said.
That would mean there is growth opportunity not just in traditional sports betting but also in the size of its database of actives, according to the report.
“We expects brand strength, scale and product to serve as key factors driving long-term winners in the group, all of which underscores our [overweight] ratings on FLTR and DKNG.”
Morgan Stanley projects a total addressable sports betting market of $16 billion in 2026, representing a 20% compound annual growth rate.
Rationalized marketing, promos helps both companies
Morgan Stanley anticipates marketing expenses to be about 19% of net sports betting revenues in 2025, or about $4 billion, for the sports betting industry.
Much of that spend should be national at that point, which benefits both DraftKings and FanDuel given their scale, MS said.
“As the US industry rationalizes both promotional and marketing dollars over time, both operators have ample flexibility to maximize those expenses given the larger revenue bases. We anticipate both opera- tors will be outsized beneficiaries of this growing trend and continue to see market share concentration gravitate towards them over time.”
US listing to bring new FLTR investors
Flutter is listed in London and Ireland, but a US listing should go live at some point in the fourth quarter of this year.
A US listing has been floated for years and is finally happening after the company received overwhelming shareholder support.
That should lead to more investors and more overall volume for the stock. Right now, the stock sees fewer than 600,000 daily trades on average compared to 11.7 million for DKNG.
