Macquarie Says FanDuel and DraftKings Are Set to Beat Q4 Earnings Estimates

FanDuel and DraftKings are set to beat fourth-quarter earnings expectations after hold rates came in well above guidance, according to Macquarie analyst Chad Beynon.

Flutter Entertainment, FanDuel's parent company, should see $100 million to $200 million in additional quarterly EBITDA beyond consensus estimates. DraftKings is looking at an extra $50 million to $100 million.

"We recommend owning online casino and sports betting stocks headed into earnings season," Beynon wrote in a Friday note. "The consensus estimates for DraftKings and Flutter are not reflecting the strong online sports betting hold seen in November and December."

The analysis draws on New York state data. Flutter's implied guidance assumed 10.9% hold, but FanDuel actually held 12.1%. DraftKings guided for 8.5% hold and posted 9.2% in New York.

Beynon raised his Q4 EBITDA estimate for Flutter to $450 million, against consensus of $343 million. For DraftKings, he now expects $273 million versus consensus of $237 million.

Most other operators saw small adjustments. Penn Entertainment, which shut down ESPN Bet on December 1 and reverted to its theScore Bet brand, should save about $4 million in losses on a 0.11 percentage point improvement in hold. Beynon still expects Penn to post a $50 million adjusted EBITDA loss for the quarter, slightly better than the $54 million consensus loss.

December handle took a hit from one fewer NFL Sunday than the prior year and a lack of marquee matchups. The strong hold rates more than made up for the softer volume.

Beynon also flagged Genius Sports and Sportradar as potentially undervalued. Both companies should benefit from continued growth in live betting as a share of total handle, he said.

Flutter reports Q4 results in late February. DraftKings typically releases earnings in early February.