Analysts on Wall Street stick with top gambling stocks ahead of NFL kickoff

Wall Street analysts are largely bullish on online sports betting leaders DraftKings (DKNG) and Flutter Entertainment (FLUT) ahead of the NFL season, maintaining "buy" or "overweight" ratings. This optimism stems from anticipated growth in consumer wagering—with 71% of surveyed respondents planning to bet—favorable NFL outcomes, and broader iGaming momentum, contributing to DKNG's >28% and FLUT's ~14% year-to-date gains. While the NFL season historically drives outperformance for these stocks, some analysts advise tactical caution given high buy-side expectations and potential for market share deconsolidation.

Analysis

Wall Street sentiment is strongly positive for online sports betting (OSB) leaders DraftKings (DKNG) and Flutter Entertainment (FLUT) entering the NFL season, with firms like Macquarie, Stifel, and JPMorgan maintaining 'buy' or 'overweight' ratings. This bullish consensus is underpinned by expectations of a surge in consumer wagering, as a Needham Research survey indicates 71% of respondents plan to bet this season, a significant increase from 60% last year. The companies are seen as best positioned for near-term upside due to favorable game outcomes and sustained OSB growth momentum, reflected in their year-to-date stock gains of over 28% for DKNG and approximately 14% for FLUT. However, this optimism is tempered with tactical caution. Stifel notes risks from high buy-side expectations, potential market share deconsolidation, and residual regulatory concerns. Furthermore, Morgan Stanley highlights a historical pattern where the typical ~450 basis point outperformance against the S&P 500 around the NFL kickoff is often followed by underperformance in the subsequent month. While current promotions are similar to last season, aggressive incentives from private competitor Fanatics pose a competitive threat. Longer-term, the potential entry into prediction markets is viewed as a neutral 'wait-and-see' opportunity, not a near-term catalyst.

Key Decisions for Investors

• Given the strong analyst consensus and expected growth in betting participation, investors may consider the current environment favorable for long positions in DraftKings and Flutter as market leaders with compounding scale benefits.
• Be mindful of the historical trading pattern where stock outperformance during the NFL season's start is often followed by a period of underperformance, suggesting a potential window for tactical profit-taking or a more cautious entry point post-hype.
• Investors should closely monitor market share data for signs of deconsolidation and the competitive impact of aggressive promotions from rivals like Fanatics, as these are key near-term risks.
• While the potential of prediction markets is a positive long-term consideration, it should not be factored into near-term valuation models as operators are expected to adopt a slow, 'wait-and-see' approach.