Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
DraftKings 3Q results
“DraftKings had a strong Q3 as its core business continues to grow nicely,” wrote Truist Securities analyst Barry Jonas in a November 8 statement. “Following an October to forget (reminiscent of last November), we believe the guide down could prove conservative given the amount of football left to be played in Q4. Further, we see it as advantageous that DraftKing’s bad stretch occurred ahead of its Q3 report (versus after in 2023) with management able to better control Street Q4 expectations. Our estimates move to the updated midpoint of 2024E EBITDA, with our 2025E down a modest -1% (though still slightly above midpoint) factoring continued strong customer acquisition. Remain Buy-rated with a $50 price target, with DraftKings still the best pure-play for digital gaming.”
Jefferies’ analyst David Katz also examined DraftKings November 8, writing “While we note the low October hold and the future risk it poses, we are focused on the FY25 revenue guide (~30% Y/Y), the multiple paths that lead to $900-$1.0 billion of EBITDA, and the associated cash flow generation (~$850M). The profit-free cash flow-buyback acceleration is also likely undervalued in the shares, in our view. The essence of our bull case is: In 2025 and beyond, the outputs become increasingly value-creating, despite 3Q24-like volatility along the way. Reiterate Buy.”
DoubleDown Interactive growth
Analyst David Bain of B Riley Securities November 11 looked at DoubleDown Interactive. “We expect DoubleDown Interactive’s social casino growth results to outpace the industry for the fourth consecutive quarter,” Bain wrote. “We believe market share gains have benefited DDI’s stock price. As such, we anticipate DDI’s 3Q24E results to be a positive catalyst. … We project CY25E ending net cash of nearly $10 per share versus $6.70 in 3Q24E. Maintain Buy.”
Online sports betting in Missouri:
“Amendment 2 narrowly passed,” wrote Jefferies’ Katz November 10, “paving the way for operators such as DraftKings and Flutter to join existing land-based operator Caesars in the state, with the amendment stating legalization must occur by December 5, 2025. On its call Friday morning, DraftKings noted that Missouri accounts for ~2% of the U.S. population, and DraftKings expects to start operating in the state once all applicable approvals have been obtained.”
Red Rock Resorts outlook revision
Truist Securities’ Jonas looked at Red Rock Resorts November 8.
“Looking forward, Red Rock Resorts has a number of renovation projects which should drive some construction disruption into 2025,” he wrote. “We revise our Q4E EBITDA to $195.5 million (from $215 million), in-line with management’s call commentary (seasonality plus $8 million unfavorable sports hold), while we lower 2025E by almost -4%, largely on construction disruptions. Price target moves to $56 (from $58). We continue to view Red Rock Resorts as a best-in-class operator with a strong long-term strategy, though expect near-term pressures as estimates re-base lower. Remain Hold-rated.
