Two gaming analysts tweaked expectations for DraftKings and FanDuel parent Flutter ahead of third quarter earnings reports.
Barry Jonas of Truist and Julie Hoover of Bank of America both noted that sports betting trends are shaping up better than expected for the third quarter, with Kelley noting he believes hold will be “better than feared.” That said, the impact of and investment from prediction markets remains a key concern.
Jonas trimmed his targets for both companies, with DraftKings now at $26 (-$3) and Flutter at $100 (-$20). He rates both companies a buy.
Hoover did not change either target and remains neutral on Flutter ($115). She recently upgraded DraftKings ($27) to buy.
Flutter will report its Q3 earnings on Nov. 4. DraftKings has not yet announced its earnings release date, though it is typically around the beginning of November.
DraftKings expected to miss
Both Jonas and Hoover expect DraftKings to announce a larger-than-expected loss in the third quarter due to higher spending on prediction markets this year.
Hoover expects an adjusted EBITDA loss of $100 million for Q3 but maintained her $500 million forecast for the full year. Jonas expects an adjusted EBITDA loss of $67 million in Q3 after previously forecasting a $41 million loss.
Jonas’ full-year adjusted EBITDA estimate is now $598 million, down from $686 million. Both of those declines should be within Wall Street’s expectations, he added.
FanDuel could beat expectations
Hoover thinks FanDuel will beat Q3 expectations while the international business is expected to miss. Trends are turning around for FanDuel, though some of that is likely from the higher promo spending Flutter promised at the Q2 call.
Market making could also be a positive in both the third and fourth quarters, Hoover said, raising her full-year adjusted EBITDA forecast to $625 million from $585 million previously.
Jonas maintained his forecast of $5 million in Q3 adjusted EBITDA for Flutter’s U.S. business.
Notably, both analyst reports were completed before Flutter announced it was restructuring its UK & Ireland business on higher UK gaming taxes.
