The NFL season begins on Thursday, so football fans may celebrate the fact that college football is already in full swing. Investors in Flutter Entertainment (NYSE: FLUT) and DraftKings (NASDAQ: DKNG) may also have cause for celebration, as the return of football frequently signals a favorable period of seasonality for the betting stocks.
Due to calendar changes as well as the operators' and their peers' struggles with customer-friendly results in the fourth quarter of 2024, some market participants feel at ease owning the two sports betting giants into the football season, which may make comparisons simpler this year.
Stifel analyst Jeffrey Stantial sets out many scenarios in a recent research to clients that could support or contradict the argument for handling re-acceleration for DraftKings and Flutter's FanDuel. Stantial listed a few potential obstacles, such as an NFL schedule that won't become interesting until the next month, indications of a slowing structural hold, and tier-two operators recording moderate increases in market share.
However, a stable environment for spending on promotions, the departure of smaller, failing competitors, and improvements to the same-game parlay offering could all help to strengthen the shares of the two sports betting giants.
As is well known, DraftKings and FanDuel operate as a duopoly, owning at least 80% of the online sports betting (OSB) market in the United States. It's also no secret that rivals have found it challenging to break through that domination, but the 2025 football season may be the time for them to increase their market share.
Among the publicly traded companies that might challenge DraftKings and FanDuel are Penn Entertainment's (NASDAQ: PENN) ESPN Bet and BetMGM, a joint venture between Entain and MGM Resorts International (NYSE: MGM). Stantial added that Fanatics, a closely held company, is in a strong position to compete with DraftKings and FanDuel.
"We expect several to make a push for share this football season, in particular PENN following more robust ESPN integrations and ahead of late-26 opt-out option,” observes the analyst. “In our view, privately-held Fanatics appears best-positioned given a clear #3 OSB product and sustained above-market promo investment.”
Data show that Fanatics has been improving in both sports betting and iGaming, with notable increases in OSB share in the prestigious New York market.
Ahead of the fourth quarter, investors considering DraftKings and Flutter should concentrate on the operators' structural hold and parlay innovation, since the latter may be essential during a period when prediction markets are breaking into parlays.
"Parlay mix and structural hold runway remains a key debate coming out of a Q2 print which saw more moderate expansion vs. peers (70bps vs. ~100bps),” said Stantial of Flutter. “Recent product improvements for the most part have been more iterative, with user adoption of FLUT’s foundational ‘Your Way’ likely critical in re-accelerating parlay mix and structural hold expansion.”
Although DraftKings' parlay mix and structural hold growth surpassed that of rival Flutter in previous quarters, the analyst notes that the company's live betting handle is a trend to keep an eye on. According to Stantial, it has been surpassing its pregame handle, "which is structurally disaccretive to parlay mix and hold."
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