Projected increase in earnings for online sports betting and gaming, but further expansion not expected
In the current knowledge up to 2023, there is no specific information from analyst Carlo Santarelli regarding potential new markets for online casinos and sports betting in 2025. However, several US states are considering or already discussing the possibility of legalising online gambling, including sports betting and casinos.
One of the states with significant potential is California, although progress in the legalisation of online gambling has been limited so far. Sports betting has often been at the forefront, but online casinos have yet to gain attention.
Texas is another state that is frequently seen as a potential large market, but there is currently little political support for the legalisation of online gambling.
Georgia could also be a potential market, particularly for sports betting, but there are no concrete legislative proposals for online casinos at present.
Oklahoma has already allowed some forms of betting and could potentially expand further.
New Mexico has legalised certain forms of gambling, but online gambling is not currently permitted.
It is important to note that the political and legal landscape in these states can change rapidly. Santarelli's perception, or that of other analysts, may vary based on recent developments, lobbying efforts, and economic factors. For up-to-date information, it would be advisable to refer to more recent reports or analyses by industry experts.
Deutsche Bank predicts revenue growth for igaming and online sports betting in 2024. DraftKings expects a structural hold of 11% in 2025, up from the 2024 expected hold of 10.5%. The gaming revenue in large-scale states such as New Jersey, Pennsylvania, and Michigan has been accelerating since October.
Deutsche Bank views Texas as the biggest opportunity for online sports betting in 2025. Santarelli expects continued and healthy same-store gaming revenue growth in 2025. He does not believe Louisiana poses a significant risk, despite recent headlines.
States such as Kansas, Arizona, Wyoming, Iowa, Colorado, and New Jersey are considered potential sources of industry consternation due to efforts to increase taxes on digital businesses in 2024. Both FanDuel and BetMGM have curbed promotions as a percentage of handle.
The industry hold stood at 9.7% for the year through September, but October eroded the upside and brought it to 9.4%. Santarelli believes Ohio and Maryland have the best prospects for near-term success among a subset of states with some form of a bill at present.
DraftKings promotions as a percentage of handle are up year-over-year during the football season, but the increase is relatively modest compared to the structural hold improvement DraftKings is articulating. The parlay mix, as measured by parlay handle as a percentage of total handle for the larger operators, appears to be reaching a plateau.
Santarelli mentioned that if expectations fall short, it will likely be explained away by a string of bad luck, and valuation will remain irrelevant. Through 2024, operators focused on improving structural hold percentage through a combination of better risk management and increased parlay mix and wager legs.
In 2024, Santarelli expects DraftKings's adjusted external sales and marketing to represent 17%-18% of net revenue. Through October, revenue was up about 30% year-over-year in the digital gaming sector. Caesars's promotions as a percentage of handle are essentially flat and remain below peer reinvestment levels.
The risk in the sector, according to Santarelli, is related to exogenous events. DraftKings targets adjusted external sales and marketing to account for about 10% of net revenue in the longer term. Flutter is guiding to a longer-term gross hold of 16%, with net hold of 12%.
Analyst Carlo Santarelli stated that revenue is expected to grow and adjusted EBITDA margins are expected to expand in the digital gaming sector. Caesars Entertainment is guiding to a longer-term gross hold of 10%. The most likely risks, in Santarelli's view, are incremental tax increase headlines and or implementations, especially in states with low taxes and promotional-deduction allowances.
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