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Tremendous Bowl May Have Brief-Time period Impression On DraftKings Inventory

Posted on: February 10, 2023, 01:00h. 

Final up to date on: February 10, 2023, 01:05h.

Tremendous Bowl LVII kicks off in Glendale, Arizona, on Sunday. It’s anticipated to be probably the most wagered on version of the massive recreation in historical past. As such, some analysts are analyzing DraftKings (NASDAQ: DKNG) inventory forward of the championship conflict.

DraftKings stock
DraftKings signage at a baseball stadium. The Tremendous Bowl may have an effect on the corporate’s share worth. (Picture: Forbes)

That’s wise as a result of DraftKings is one in all a small variety of pure play iGaming and sports activities wagering equities available on the market at present. In a Friday report back to purchasers, Macquarie analyst Chad Beynon notes that relying on the result of the sport, DraftKings inventory and a few equivalents may get a lift.

Primarily based on current business volumes, we estimate $1.0-1.5bn can be wagered on this yr’s Tremendous Bowl legally (~50%+ development YoY) pushed by a mix of legalization (~20% development) and from continued mainstream adoption (~30% development) because of higher product choices (e.g., SGP, props) and higher consumer experiences (e.g., tech developments),” wrote the analyst.

Beynon notes that whereas the Tremendous Bowl gained’t be considerably totally different from a daily season NFL recreation, single-game volatility may be “materials” to sportsbook operators’ month-to-month and quarter gross gaming income (GGR) outcomes.

How Tremendous Bowl Volatility May Impression DraftKings Inventory

As issues stand at this writing, the Philadelphia Eagles are -1.5 favorites over the Kansas Metropolis Chiefs and the over/underneath is 51 factors. Seventy % of public bettors are on the Eagles and 57% are on the over, based on Macquarie information.

Translation: Assuming no vital modifications in betting patterns over the following two days, sportsbook operators are cheering for a low-scoring affair gained by the Chiefs.

“We view low-scoring video games as incrementally useful to sportsbooks given the proliferation of single-game parlays (SGPs) as public bettors favor SGP bets with excessive scoring outcomes,” added Beynon.

In analyzing DraftKings inventory as a Tremendous Bowl play, the Macquarie runs bull, bear and common situations for the operator. These embrace DraftKngs commanding wherever from 20% to 30% of Tremendous Bowl deal with with maintain estimates starting from -5% to twenty%.

“To position the upside/draw back situations into context, and assuming a 25% deal with market share for DKNG, we estimate a constructive consequence (bull case) may add as much as 10% upside to present 1Q23 consensus whereas the bear state of affairs has 5% draw back,” based on the analyst.

Whereas sports activities wagering equities have a historical past, albeit temporary, of rising after the Tremendous Bowl, some analysts are bearish on DraftKings, cautioning traders that the operator’s 2023 profitability narrative will face headwinds.

Tremendous Bowl Essential, However Not Make or Break

Whereas there’s all the time hype ascribed to sports activities betting equities vis a vis the Tremendous Bowl, analysts and savvy traders largely view it as simply one other occasion on the calendar.

“That mentioned, most operators are extra involved with making the most of buyer acquisition and engagement alternatives main as much as the Tremendous Bowl,” concluded Beynon.

That’s to say that if DraftKings can purchase a slew of latest clients on an economical foundation because of the Tremendous Bowl, it may pay long-term dividends for the operator’s efforts to show worthwhile.