Steven Pizzella of Deutsche Bank called the sports betting data providers winners while advising investors to hold on the DraftKings stock in a recent note.
Pizzella raised targets on multiple sports betting and online casino stocks based on the industry outlook and momentum for the next 12 months:
- DraftKings: $37, hold
- Genius: $13, buy
- MGM Resorts: $50, buy
- Sportradar: $34, buy
B2C gaming stocks will likely trade on shorter-term narratives in the short to medium term, which Pizzella said will increase the volatility and swings in both directions.
On the long term, Pizzella said the industry faces an uphill battle with online casino expansion, potential for more tax increases, volatile online betting handle growth and “aggressive” guidance/estimate ranges beyond this year.
DraftKings stock: ’25 targets lowered
Pizzella raised his 2026 adjusted EBITDA estimates for DraftKings, though it remains a bit off of consensus.
He now forecasts $1.218 billion in adjusted EBITDA for next year, up 1.8% from his prior estimate. That is still more than 14% off the consensus estimate of $1.423 billion, though.
For 2025, the increased taxes in multiple states drag his adjusted EBITDA expectations down 2.2% to $830.6 million. Part of that tax impact is offset by the upside seen throughout the industry in the second quarter.
Every 10% move in EBITDA from his current forecasts is worth around $4 to the price target, Pizzella noted.
GENI, SRAD have plenty of positives
Genius Sports and Sportradar are “long-term winners” and Pizzella’s “preference” on how to invest in the digital gaming segment.
He lists six main reasons:
- 60% to 70% of fixed recurring revenue streams are growing at low to mid teen compound annual growth rates.
- Data providers are the primary beneficiaries of the growing live betting segment.
- AI is accelerating product offerings, which create cross/up selling opportunities.
- Data rights deals are secured through medium- to long-term contracts on average.
- Acceleration of free cash flow.
- A duopoly “should provide longer-term tailwinds.”
MGM stock catalysts include BetMGM
While Pizzella’s estimate changes were mostly driven by land-based operations, digital could still play an important role in the stock.
He lists multiple catalysts for MGM, including potentially winning a New York casino license, a “solid” 2026 group calendar for Las Vegas, and its Japanese opening in 2030.
On the digital side, Pizzella notes that both BetMGM‘s inflection to profitability and the “potential for future strategic actions in regards to the 50/50 JV” are upsides.
MGM buying Entain out of its BetMGM partnership has long been a rumored possibility. MGM CEO Bill Hornbuckle said that idea was over with in early 2023, but BetMGM could also spin off as a public company.
Caesars spinoff possible, too
Pizzella said he prefers to play the digital segment “via idiosyncratic free cash flow inflections at undemanding valuations,” which includes Caesars.
While most of the positives for Caesars include land-based gaming, he notes the growing digital segment gets “little credit towards valuation.”
Pizzella, like others, sees potential for Caesars to “seek strategic alternatives to unlock the value.”
He rates Caesars at buy with a $51 target.
