Analysts at Stifel included FanDuel-parent Flutter in its list of “Best In Class” stocks as concerns about a recession and tariffs rock the markets.
Flutter and IGT, a gaming supplier that touches all corners of the industry — including sports betting and online casino — were the two gaming stocks listed by Stifel in a report released Monday night. Royal Caribbean Group and OneSpaWorld rounded out the list of four.
“What we mean by ‘best in class’ is that we believe these four names should outperform other names across our space even if the macro backdrop deteriorates and impacts consumer travel/demand (which we believe is already priced into current trading levels),” Stifel said in the note. “These four names have some unique operating aspects that should keep their businesses somewhat isolated from macro pressures.”
Flutter (buy, $320 target) is down 7.1% since the “Liberation Day” tariffs were announced on April 2, closing Monday at $213.23. IGT (buy, $26 target) has felt the pinch a bit more, down 11% to $14.72 through Monday.
Opportunity To Buy Into FanDuel
The market-wide sell-off due to the far-ranging and potentially changing tariff concerns offers an enticing entry point to buy into Flutter, Stifel said.
“We believe the tariff-related pullback affords a unique opportunity to buy into a quality, growth story where we see unparalleled combination of secular TAM growth & expanding moat even evaluating the broader consumer-facing digital landscape,” the note said.
The analysts said they are comfortable owning either DraftKings or the FanDuel parent stock but recommend owning the “highest-quality names in our coverage” in this type of market, which points to Flutter. DraftKings is down 4.5% since April 2.
Stifel has “reason to suspect” online casino and sports betting could be a “trade-down beneficiary” in a recession given it is an at-home activity with a smaller average bet size than in-person gambling.
Recession Good For Legislation?
Gambling expansion could see a boost if a recession leads to lower tax revenues, the analysts said.
Tax revenue to help fill budget gaps is typically a strong selling point to states when it comes to legalizing new forms of gambling. That need for cash usually outweighs any other concerns about gambling legislation that states may have faced in the past.
That could create a “snowball effect,” Stifel said, as states that neighbor jurisdictions that are expanding gambling could do the same to prevent tax dollars from leaving the state.
Nineteen states (home to 39% of the US population) still have no sports betting legislation on the books. Online casino gambling, meanwhile, still has 42 states to legalize, or 87% of the population.
