Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
DraftKings outlook tweaked
Analyst Joseph Greff of J. P. Morgan on January 2 looked at DraftKings’ prospects for 2025.
“We are tweaking our 4Q24 net revenue and EBITDA estimates lower to $1.375 billion and $68 million (from $1.525 billion and $168 million), which contemplates another unfavorable stretch of sports outcomes for OSB operators in December,” Greff wrote, “where favorites, multi-game parlays, and other bets heavily backed by the public won at a (much) higher than normal rate.
“Our revenue and EBITDA estimate reductions of $150 million and $100 million, respectively, reflect a similar low hold impact to the $250 million/$175 million revenue/EBITDA impact DraftKings had called out for October on its 3Q24 earnings call, as December-to-date New York weekly data indicates a 7.0% OSB hold rate for DraftKings (7.2% for the industry), which is roughly in-line with DraftKings’s New York OSB hold rate in October of 7.2% (7.6% for the industry). Offsetting this impact is stronger than expected sport outcomes in November, which drove an 11.6% industry hold rate for the month in states that have reported data thus far.”
U.S. revenue per available room
Analyst C. Patrick Scholes of Truist Securities on January 3 examined U.S. revenue per available room for the week ending December 28, which was down 6.5 percent year-over-year. The result was “below the prior week’s result of +14.3% year-over-year and below the trailing 10-week average of +6.0% year-over-year.
“As we previously expected, last week’s results were primarily impacted by the calendar shift/day of week timing of Christmas. Additionally, Hanukkah fell on the 25th. Christmas shifted to a Wednesday in 2024 from a Monday in 2023, which is a more difficult comp simply due to a midweek holiday. Major holidays that fall on a Wednesday are always disruptive for demand, even for the limited group and business travel that occur during Christmas week.”
Las Vegas, Macau outlook
David Katz of Jefferies on January 3 looked at prospects for Las Vegas properties, notably Caesars and MGM, as favorable versus 2024 headwinds.
“Both are too inexpensive to ignore (6.8x and 6.2x, respectively) and are pivoting digitally, but need to execute better,” Katz wrote of Caesars and MGM Resorts. “Wynn Las Vegas executes superbly, has overlooked domestic resources and global projects. In locals, Boyd has easier comps in 2025, while the capital cadence for RRR through 2026 leaves us measured. Golden stated its intent to become more strategically dynamic in 2025 given its set-up.”
Katz also looked at prospects for Macau properties. “The post-COVID recovery in Macau has been range-bound at 20%-25% below 2019 levels, with December running 19% lower,” Katz wrote. “However, given recent government economic stimulus announcements, we forecast a return to 2019 levels by 2026.”