The big enchilada

“The Biggest Gaming Opportunity Since Riverboats in the Early ’90s.” That’s how JP Morgan gaming analyst Joseph Greff, a man not given to hype, characterized i-gaming and sports betting today. He described them as “as an emerging and exciting area of growth within US Gaming, with potential to drive significant multiple expansion and value creation for operations within our coverage universe.” How much value? Greff ascribes $17/share of Caesars Entertainment‘s worth of sports betting and Internet wagering. It’s even better for Penn National Gaming: $18/share. Sports betting “is highly competitive and should have a longer road to profitability, while iGaming is generally profitable for operators right now.” Furthermore, “near-term success drivers include brand recognition/customer engagement, first mover advantages, willingness to spend on marketing/customer acquisition, and media/league partnerships.” Said Greff, “the potential growth of this industry should result in emerging companies seeking access to capital … and online/digital companies entering the gaming industry.”

Sports betting currently reaches 41% of Americans, being legal in 23 states and operational in 19 of those. In states where it is online, sports betting via the Internet is overwhelmingly dominant in market share. Greff projects $7.6 billion in sports-betting revenues by 2025 (it was $900 million last year, with four states accounting for almost all the action). “Our $7.6b forecast assumes 13 additional states legalize sports betting over the next several years, bringing the total to 35 (~70%+ of US adult population), though we note this is highly subjective.” Part of that assumption is dysfunctional California, so that’s a mighty big ‘if.’