DraftKings Will not Really feel A lot Ache From Faculty Prop Betting Ban
A proposed ban on faculty proposition wagers would seemingly have minimal affect on DraftKings (NASDAQ: DKNG), in accordance with sell-side analysts overlaying the corporate.
Workers at DraftKings headquarters. Analysts say the specter of a ban on faculty prop bets can have minimal affect on the gaming firm. (Picture: CNBC)
A number of analysts chimed in on the matter on Thursday. That was a day after shares of the web sportsbook operator and rival Flutter Leisure (NYSE: FLUT), the mum or dad firm of FanDuel, slumped on information that NCAA President Charlie Baker mentioned the group needs to halt prop bets on faculty athletic occasions to bolster integrity.
Analysts acknowledged that whereas traders overreacted to Wednesday’s information, as highlighted by the slumps endured by DraftKings and Flutter, the general impact of misplaced faculty prop bets is probably going minimal to these operators and their rivals. In a be aware to purchasers on Thursday, Financial institution of America analyst Shaun Kelley mentioned alterations within the faculty prop betting panorama are “de minimus” for DraftKings.
Moderately, he views the specter of upper taxes on on-line sports activities betting as probably extra regarding to the younger trade.
Different Analysts Defend DraftKings
With New Jersey policymakers floating a plan to probably elevate taxes on iGaming and sports activities betting, and Sen. Richard Blumenthal (D-CT) saying extra federal oversight of how operators goal “high-value” bettors is required, this week’s information move for DraftKings, Flutter, and the trade at massive has been detrimental.
Nonetheless, Wall Avenue remains to be in DraftKings’ nook. JPMorgan informed purchasers that Wednesday’s sell-off was overdone, whereas reiterating an “obese” score and $55 value goal on the inventory. That suggests upside of 21% from Thursday’s shut.
MoffettNathanson has the same view. The analysis agency acknowledged there may be some headline threat threatening on-line gaming shares. Nevertheless it reiterated a “purchase” score on DraftKings whereas boosting its value forecast on the inventory to $55 from $52.
Of the 32 analysts with scores on DraftKings, 24 grade the inventory the equivalents of “robust purchase” or “purchase.”
A Completely different View
JMP Securities analyst Jordan Bender had a considerably totally different tackle the school prop betting ban. In a be aware to purchasers on Thursday, he identified that in 2023, faculty sports activities drove $1.6 billion of income for regulated U.S. on-line sportsbook operators, whereas accounting for about 15% of the general deal with.
He added that with prop wagers rising in recognition, $200 million in income might be in danger, based mostly on 2023 figures, if a ban is enforced.
On the finish of the day, bettors will discover a technique to wager on occasions and gamers, and we consider the trouble to ban particular person participant betting will seemingly solely push gamers again offshore, whereas we estimate over 50% of wagers at the moment are in america,” wrote Bender.
He did be aware that the combo of participant prop bets on faculty video games is decrease than what’s discovered on skilled sports activities.
