Does Boyd Stock Offer An Early Opportunity Ahead Of FanDuel Spin Off?

[Updated 3/24/2021]

In a recent press release, Flutter Entertainment clarified about the partial listing of FanDuel in the U.S. by highlighting that the matter is under consideration, but no decision has been taken yet. FanDuel is the most popular sports betting application in the U.S. and Boyd Gaming (NYSE: BYD) has a 5% stake in it. As speculation builds-up over FanDuel’s spin-off by Flutter Entertainment (Flutter has a 95% stake in FanDuel), Trefis believes that picking Boyd stock ahead of the decision is unlikely to provide strong gains. We highlight the historical trends in Boyd Gaming’s revenues, earnings, and stock price in an interactive dashboard analysis, Buy Or Fear Boyd Gaming Stock?

FanDuel reported a 40% share of the U.S. sports betting market and total revenue of $967 million in 2020 – sizeably higher than $614 million for its competitor Draft Kings. After acquiring FanDuel in July 2018, Flutter’s market capitalization has jumped by $20 billion. While the impact of other acquisitions is also included, but comparing this with Draft Kings’ $28 billion valuation, Flutter stock has a reasonable upside. However, Boyd Gaming’s $3 billion gain in market value since February 2020 indicates FanDuel’s valuation at roughly $60 billion [$3 billion x (95%/5%) = $57 billion] – a figure too high to make a near-term bet.

[Updated  2/11/2021]

The shares of Boyd Gaming (NYSE: BYD) have gained 78% in the past quarter supported by broader momentum in sports betting and the iGaming industry. By acquiring a 5% stake in FanDuel, Boyd Gaming entered into a strategic agreement to develop its sports betting application, B Connected, in 2018. In exchange, FanDuel sports book will gain market access in states where Boyd has a gaming license. While Boyd does not report the sports betting handle, but the stock has potential to gain more due to the ongoing rally in all sports betting stocks. We highlight the historical trends in Boyd Gaming’s revenues, earnings, and stock price in an interactive dashboard analysis, Why Boyd Gaming Stock Has Gained 72% In A Year?

Pandemic took a toll on Boyd Gaming’s fundamentals

Boyd Gaming’s revenues fell by 38% (y-o-y) for the first nine months of 2020, impacted by state-induced lockdowns and a slump in discretionary spending. However, the stock breached its pre-Covid level in the past quarter as broader momentum was observed in the sports betting industry. Interestingly, the shares of Penn National Gaming, Boyd’s immediate competitor, have skyrocketed due to the popularity of its sports betting application Barstool. In our earlier analysis, we highlighted that at a 15% expected market share, Penn stock’s market capitalization has increased by 340% from $3.8 billion to $17 billion in the past twelve months. Thus, Boyd’s 78% gain in the past-quarter indicates more room for growth.

Overview of Sports Betting Industry

After the Supreme Court overturned the Professional and Amateur Sports Protection Act (“PASPA”) in 2018, the sports betting and iGaming industry went live in 25 states. Currently, Nevada, New Jersey, and Pennsylvania account for almost 75% of the sports betting handle. At maturity, the sports betting & iGaming industry is likely to reach $40 billion in the U.S. and $70 billion globally. Thus, multiple sports betting applications, including FanDuel, bet365, Hardrock Café, BetMGM, and William Hill, are eyeing a sizable share of the pie.

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