By Angela Palumbo

Although shares of the online sports betting platform DraftKings and Flutter Entertainment, FanDuel's parent, usually rise in the days leading up to the Super Bowl, this year looks different.

The Kansas City Chiefs and Philadelphia Eagles will face off at Super Bowl LIX Sunday night. While fans are filling their fridges with beer and dip for chicken wings, online gamblers are choosing what bets they want to make on the biggest NFL game of the year.

According to a report from the American Gaming Association on Tuesday, Americans are expected to wager a record $1.39 billion legally on this year's Super Bowl.

All that betting excites investors in online sports betting platforms. According to Dow Jones Market Data, from 2020, the year DraftKings went public, to 2024, shares of DraftKings have risen an average of 5.9% in the week leading up to the big game.

The Super Bowl effect is less pronounced for the European gambling company Flutter, which benefits from the game via its ownership of the U.S. betting platform FanDuel. Last year, when Flutter switched its primary listing to the NYSE, the stock rose 0.2% the week before the big game.

Shares of both DraftKings and Flutter aren't in position to score similar gains this year, though. As of midday on Tuesday, DraftKings stock has dropped 4% this week, while Flutter is down 2.3%.

Ohio Gov. Mike DeWine said in a press conference on Monday that the state's new proposed budget would raise the tax rate on sports betting to 40% from 20%. Maryland Gov. Wes Moore also recently introduced a 2026 budget plan that included increasing the rate to 30% from 15%.

"Increases in taxes on GGR [gross gaming revenue] directly compress operators' margins, leaving less room to invest in customer acquisition, retention, and product enhancements," TD Cowen analyst Lance Vitanza said in a note on Tuesday. "For operators like DraftKings, which already faces high customer acquisition costs in a competitive market, higher taxes force difficult trade-offs such as scaling back promotional spending, offering less favorable odds, or prioritizing profitability above growth."

Vitanza lowered his price target on DraftKings to $51 from $55 while maintaining a Buy rating on the stock.

On top of potential risks from the increased tax rates, Vitanza said that his new price target was driven by "unfavorable sports results and elevated parlay losses during the quarter." Parlays let users combine two or more single wagers into one bet, increasing the potential payout.

On Jan. 7, Flutter said in a company update that the current NFL season "has been the most customer-friendly since the launch of online sports betting." The company cut its fourth-quarter financial guidance for its U.S. operations.

Still, Wall Street is mostly optimistic about DraftKings stock. Of the 37 analysts surveyed by FactSet, 32 say the stock is a Buy and five rate it at Hold.

"We expect both revenue and adj. EBITDA will come in below expectations in Q4 due to the stretch of customer-friendly NFL outcomes throughout December, although this has likely already been priced in by investors and underlying user acquisition & engagement trends remain very encouraging," Canaccord Genuity Jason Tilchen said in a note on Monday. He rates DraftKings as a Buy with a $54 price target.

And of the 29 analysts that cover Flutter on FactSet, 25 say the stock is a Buy, three say it is a Hold, and one rates it at Sell.

So even though shares may be fumbling in a week they historically score, there could be wins on the horizon.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 04, 2025 14:56 ET (19:56 GMT)

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