Online sports betting companies are expected to post a largely in-line Q1, but their results increasingly reflect a competitive landscape that’s becoming harder for investors to ignore.
Truist Securities cut price targets on online sports betting market leaders DraftKings and FanDuel parent Flutter, citing a more cautious view tied to prediction market uncertainty, softer handle and a promotional environment expected to ramp back up this summer.
The firm said sports event contracts are likely to remain an overhang on investor sentiment given an unclear regulatory path, even as core online sports betting trends remain relatively stable.
Online sports betting handle keeps dropping
State-level data tracked by Truist shows online sports betting handle down 2% year-over-year in Q1-to-date:
- January: -3%
- February: -1%
- March: -4%
Operators are offsetting that volume softness with better margins. Hold is tracking around 9.8%, up roughly 0.2 percentage points, helped by a stronger March comparison after last year’s bettor-friendly March Madness.
Promo pullback boosts online sports betting hold
Promotional spend is also moving in the right direction.
Across comparable states, promos are down 20% year-over-year and now make up just 3.1% of handle, compared to 3.7% last year.
The pullback has been most pronounced at DraftKings, where promos have fallen to 2.6% of handle, while Flutter has trimmed spend to 3.8%.
Prediction markets begin to show up
At the same time, prediction markets are starting to move from a narrative risk to something more tangible.
Truist said operators are already seeing a modest single-digit drag on handle directly tied to competition from prediction markets offering sports event contracts, while investor sentiment around digital leaders like DraftKings and Flutter remains closely tied to how that landscape develops.
Prediction market volume reached $8.4 billion in February, compared to $11.5 billion in reported online sports betting handle. Adjusted for structural differences, Truist estimates that equates to roughly 1% to 2% of OSB-equivalent handle, still small, but increasing.
Truist cuts DraftKings, Flutter price targets
Against that backdrop, Truist lowered price targets on the two largest U.S. operators, cutting DraftKings to $30 from $33 and Flutter to $140 from $160, while maintaining buy ratings on both.
The changes reflect a more conservative outlook tied to increaisngly uncertainty around prediction markets, potential incremental investment, and future promotional spend around the World Cup.
BetMGM’s Q1 results provided an early look at how those trends are playing out.
Handle rose 3% year-over-year, with revenue up 4% and hold improving to 8.8%, up 0.6 percentage points. At the same time, average monthly actives declined 16% in online sports betting, a reflection of more selective acquisition strategies and growing competitive landscape.
Regulatory outlook still unresolved
Truist expects prediction market uncertainty to ultimately resolve, but not for some time.
With multiple states pursuing litigation and others issuing cease-and-desist orders, the firm sees a path that likely leads to the Supreme Court, potentially around 2028.
In the meantime, operators will continue pushing for clearer enforcement and regulatory boundaries as the competitive landscape evolves.
