Deion Sanders’ Colorado Prime Pain for Sportsbook Operators, Says Analyst
Posted on: September 12, 2023, 04:40h.
Last updated on: September 12, 2023, 07:22h.
The 2023 college football season is just two weeks old, but sportsbook operators are already feeling adverse hold effects due to the resurgent Colorado Buffalos, led by coach Deion “Primetime” Sanders.
In a note to clients today, Macquarie analyst Chad Beynon estimated that college football wagering likely accounted for 30% of all football bets last week, with the NFL grabbing a 70% share. With substantial social and traditional media enthusiasm surrounding Sanders’ squad, the Buffalos were a hold problem for sportsbook operators in the first two weeks of the season, according to Beynon.
The ‘Deion Sanders effect’ continued for the second week in a row. In his first year as head coach of the University of Colorado, Deion has created a massive social media buzz around the team,” wrote Beynon. “As a result, their game against Nebraska garnered as many bets as the Texas/Alabama game in primetime.”
To the detriment of sportsbooks, Colorado easily covered the spread against Nebraska with the total going over (recreational bettors broadly prefer overs). That result came a week after Colorado won outright as 20.5-point underdogs at TCU.
Beynon observed that an estimated 80% of the betting public backed Colorado last week. Another problem for sportsbook operators was Texas moneyline exposure as the Longhorns upset Alabama on the road.
NFL Likely Helped Sportsbook Operators
While Deion Sanders’ Colorado team has been a thorn in the side of sportsbook operators for two weeks now, gaming companies made for some lost hold during the first week of NFL action.
Beynon estimated that during week one of the NFL, single-game hold for gaming companies reached 13% on sides and 9% on totals. That was assisted by 73% of games going under, which likely dealt blows to an array of single-game parlays (SGPs). Road teams going 12-3 against the spread likely helped operators, too.
“Our model estimates total sports betting market hold of 8% for the week of Sept 4–10, assuming a football hold of 8% and hold of 9% for all other sports,” added Beynon. “As a rule of thumb, every 100bps of hold above/below the long-term average adds/detracts ~14% (or 1,400bps) of incremental sports betting gross gaming revenue (GGR) growth.”
Last month in New York – the largest sports wagering market in the country — Flutter Entertainment’s (OTC: PDYPY) FanDuel was the hold leader at 10.3%, followed by BetMGM at 9.2%, according to Macquarie. WynnBET was third at 8.9%.
Q3 Hold Shaping Up Nicely
With less than three weeks remaining in the third quarter, it’s worth noting that the overall industry hold has been solid.
Market hold has been strong QTD (~10%), but with monthly volumes increasing ~70% seq in September, much is still to be determined,” said Beynon. “That said, we think the rise in popularity of NFL SGPs places somewhat of a floor on hold rates for operators that get heavy SGP volume. We also caution that last September had a very high market hold of almost 12% due to favorable game outcomes, so an expectation for sequential revenue growth again this year in 3Q may disappoint given volumes are usually slightly down 3Q/2Q.”
The analyst said pullbacks among sports wagering equities are buying opportunities. He has “outperformed” ratings on seven gaming equities, including sportsbook operators DraftKings (NASDAQ: DKNG) and Rush Street Interactive (NYSE: RSI). His price targets on those names imply upside of 20% and 16%, respectively.
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