top sports betting picks, push for profitability and ESPN wildcard

The NFL season will begin on Thursday night with the defending Super Bowl champion Kansas City Chiefs playing the Detroit Lions at 8:20 p.m. The pro football season will be front and center for the sports betting industry through the Super Bowl in Las Vegas on February 11, 2024.

Ahead of the launch of the new NFL season, an annual survey released by the American Gaming Association forecasted a notable increase in the number of adults who will place a bets during the 2023 NFL season. The AGA survey indicated that 73.5M adults in the United States will place wagers this fall and winter on the NFL vs. 27M adults from 2022. The new season begins with FanDuel (OTCPK:PDYPY) and DraftKings (DKNG) holding the top spots for sports betting market share. BetMGM (OTCPK:GMVHF) (MGM), Caesars Entertainment (CZR), and Bet365 are still scrapping to nab market share, but some operators such as FuboTV (FUBO), MaximBet, and the online sports betting arm of Churchill Downs (CHDN) have ceased operations or cut down dramatically on their reach. Meanwhile, PointsBet (OTCQX:PBTHF) agreed to sell its U.S. business to Fanatics (FANA). This year's NFL season arrives with sports betting operators focused on profitability ahead of market share at all costs. Crucially, Needham tipped that promotional activity in the sector is relatively benign at the moment.

The biggest wildcard to watch this NFL season could be Disney's (NYSE:DIS) ESPN Bet entering the sports betting scene through a deal with Penn Entertainment (PENN). ESPN Bet is not expected to launch until the middle of the season, but will get an immediate push from ESPN's broad football coverage across different platforms. Wells Fargo said it is too early to conclude that the ESPN deal is a game changer. Analyst Daniel Politzer said ESPN is the media leader in sports, but also reminded that Caesars Entertainment (CZR) and DraftKings (DKNG) had mixed success with their ESPN marketing partnerships, while media partnerships such as Bally's, Fox Bet, and PointsBet-NBC have not lived up to the initial buzz. If the launch of ESPN Bet leads to a jump in promotional activity in the sector, Gambling.com (GAMB) has been called out by Roth analyst Edward Engel as a stock that could benefit.

A recent online sports betting survey by Jefferies indicated that 44% of respondents have bet within the past 12 months vs. the 37% in January.

"Respondents continued to demonstrate loyalty, as 89% of respondents indicated they are likely/very likely to continue betting with their current accounts, versus 83% in January. It is also worth noting that bettors are more likely to keep more than one sportsbook account with 33% of the respondents indicating intent to maintain just one account (40% prior) and 39% intend to have two (37% prior), while those intending to keep three accounts grew to 20% from 15% in the last survey."

Making the picks: Needham said its top online sports betting picks are DraftKings (DKNG) and Genius Sports (GENI). Analyst Bernie McTernan said the firm foresees upside from the shift DKNG made this year to focus on growth and profitability. "We view the 4Q analyst day as a potential positive catalyst," he noted. Genius Sports (GENI) is a top sector pick at Needham due to its strategic positioning in the ecosystem as a supplier of mission-critical data. McTernan also sees potential upside to estimates in the second half. Meanwhile, Jefferies heads into the NFL season with DraftKings (DKNG) and Flutter Entertainment (OTCPK:PDYPY) lined up as top picks.

The Roundhill Sports Betting and iGaming ETF (NYSEARCA:BETZ) is up 19% on a year-to-date basis. DraftKings (DKNG) and Penn Entertainment (PENN) are the two top holdings in the ETF.