DraftKings (NASDAQ: DKNG) probably experienced the same downturn as competitor Flutter Entertainment (NYSE: FLUT), which informed investors on Tuesday that its fourth-quarter and 2024 earnings and revenue are anticipated to fall short of earlier targets due to customer-favorable results in the NFL. 

After Flutter provided its financial alert post US markets closing on Monday, the stock dropped in after-hours trading, yet the shares recovered on Wednesday, with DraftKings rising in tandem. Nonetheless, Bank of America analyst Shaun Kelley cautioned that gamblers' ability to choose NFL victors in the fourth quarter – the reason for Flutter’s warning – probably impacted DraftKings as well. 

This year, NFL favorites are triumphing outright in over 70% of games and covering spreads almost 54% of the time — ranking among the highest percentages in the Super Bowl era. That’s positive information for gamblers and negative information for operators. Kelley projected that DraftKings' EBITDA for the fourth quarter might be squeezed by $60 million to $80 million as a result of the NFL chalk being so prevalent. 

Kelley mentioned that the EBITDA challenge experienced by DraftKings is probably lower than what market players anticipated, and less than that of Flutter on a relative scale. 

DraftKings Experienced Superior Q4 Fortune Compared to FanDuel 

DraftKings and Flutter-owned FanDuel are frequently linked together as they are two of the most prominent names in sports betting, maintaining a nearly unshakeable duopoly in the market; however, the former might have experienced a touch more luck than the latter from October to December.

"Several mitigating factors for DKNG include 1) DKNG’s sponsorship of the Tyson-Paul fight with strong volumes/hold in Nov., 2) a +4891 pre-made parlay hitting on FanDuel in Dec. with over 17k bets placed, and 3) unfavorable outcomes during FanDuel’s sponsorship of NFL Christmas Day games on Netflix,” observed Kelley.

The NFL is the most bet-on league in the United States. Isolated NFL matches, like "Monday Night Football" or games broadcasted on holidays, generally attract more wagers, indicating a heightened risk for sportsbook operators if favored teams emerge victorious and meet the spread. 

Regarding Flutter... 

For DraftKings, Flutter, and their lesser competitors, the promising news is two-pronged. To begin with, the percentages of NFL favorites that won outright and covered the spread this season are exceptionally high, suggesting that repeats are improbable next season. Secondly, evidence shows that the majority of recreational bettors in the US are not particularly skilled at sports gambling. They might relinquish profits from the NFL regular season during the playoffs, especially as the NBA and college basketball intensify. 

In other words, the NFL trend is probably temporary, and some analysts see any future decline in Flutter's shares as a chance to buy. 

“Outside the US, Flutter saw sports betting outcomes that benefitted its financials. We think transitory tailwinds aided revenue and adjusted EBITDA by over $100 million and about $30 million in the period,” notes Morningstar’s Dan Wasiolek. “We don’t expect much change to our $275 fair value estimate, leaving shares slightly undervalued. We would view share weakness as an opportunity for investors to accumulate an industry’s leading brand, source of its narrow moat rating, buoyed by Flutter’s stout product development and risk management.”