Refining his view of FanDuel’s corporate parent Flutter Entertainment, Jefferies Equity Research analyst James Wheatcroft launched a Memorial Day investor note by saying he was fine-tuning his estimates on the company based on its first-quarter numbers. But, he continued, he was making no material changes to his underlying perspective.

Wheatcroft attributed slower U.S. revenue growth “to new state investment and weak sports margins, exacerbated by higher parlay and basketball mix.” However, he felt that momentum overall remained potent. Based on April results, he predicted higher U.S. margins for Flutter, sustained igaming activity, and “robust” non-U.S. performance.

Sticking by his estimates for the 2024 fiscal year, Wheatcroft projected revenue growth of 25 percent in the U.S. and six percent internationally. This would translate into cash flow of $204 million domestically and $940 million overseas.

The analyst was also encouraged by early May data, with New York state showing record gross gaming revenue for the week ending May 12. In Italy, Flutter was displaying “continued market outperformance,” with an April revenue increase of 13 percent compared to four percent for the overall market.

A March Madness-related smackdown of sports-betting margins, plus the costs of going live in North Carolina, dampened first-quarter numbers. North Carolina’s early growth of 56 percent decelerated to 32 percent.

“While the margin weakness was well flagged, we believe the outsized impact to FanDuel was amplified by a skew to parlays (typically higher, but more volatile margins) and basketball (unfavorable March Madness results were a primary source of low margins),” Wheatcroft explained. He added, “Illinois data is supportive of this view.”

That “outsized impact” was amplified by FanDuel’s industry-leading parlay handle (35 percent), especially when compared to a 40 percent lower impact on DraftKings. FanDuel also had the most non-parlay roundball handle (72 percent) versus an industry-average 67 percent.

But it had the lowest margin in basketball wagering at 3.3 percent. Wheatcroft took comfort in FanDuel’s top ranking for parlay margins: 19.1 percent against DraftKings’ 14.3 percent and the remainder of the industry’s 13.5 percent.

Other key takeaways from the latest earnings call were that FanDuel was growing igaming share by taking from its competitors, “despite FanDuel being a traditionally sports-oriented brand,” and that the North Carolina inception was FanDuel’s second-best ever. Wheatcroft offered no comment on the potential effects of an imminent tax increase in Illinois.

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