Speaking to Wall Street analysts yesterday about US online casino legalization’s future, Entain CEO Jette Nygaard-Andersen came up with a catchy phrase to sum up the near-term outlook.
The leader of Isle of Man-based Entain, which runs BetMGM in a joint venture with Las Vegas-headquartered MGM Resorts International, did so while answering a question.
Asked about which states she believes will next launch legal online casino gambling, she said:
The Three Is, and then New York.
By Three Is, she meant Illinois, Indiana, and Iowa.
The query came from David Brohan, senior equity research analyst with Dublin stockbroking firm Goodbody. It may have sounded straightforward, but his question during Entain’s Q3 2022 trading update highlights Wall Street’s optimism about US online casino gambling’s future.
He’s not the only analyst speaking as though sector growth is inevitable. However, that sentiment seems to be a change from the Wall Street consensus. Less than two years ago, analysts believed that operators spent far too much on marketing and advertising.
Plus, analysts’ optimism seems to spread beyond Nygaard-Andersen’s call. While it may be easier to believe in a bright future for BetMGM, which holds the plurality of the market share (31%) in the states where it operates, Wall Streeters seem to be wearing sunglasses to view other US online casino stocks, too.
Analysts on US Online Casino’s Future
On Sept. 22 at the East Coast Gaming Congress and NexGen Gaming Forum (ECGC), an entire panel of analysts opined during the Analyze This session in Atlantic City.
Despite pulling at the threads, the speakers intoned that the US online casino industry’s fabric is strong.
They said:
- US online casino gambling is only in its second or third inning, “if that,” posited Joel Simkins, a managing director at Los Angeles-based investment bank Houlihan Lokey.
- iGaming is a better opportunity than sports betting, said Gabe Fineberg, a vice president at Santa Monica, Calif.-sited investment firm Beach Point Capital Management. (Author’s note: In May 2021, while researching a story for the former Catena Media site Online Poker Report, we found online casinos in the full-service online gambling states of Michigan, New Jersey, Pennsylvania, and West Virginia accounted for 70% of gross gaming revenue.)
- Online gambling operators can still be successful if they’re not No. 1, but they need to be in the top tier, said Teddy Swigert, a managing director at Zurich-headquartered investment bank Credit Suisse.
- Operators appear to be more concerned with profit now than customer acquisition. Analysts want to see profitable businesses and he thinks operators will turn “meaningful profits” in 2024 or 2025, related Colin Mansfield, a sector head of US Gaming and Leisure at New York-sited credit rating agency Fitch Ratings.
Is Power Concentrated at the Top?
Panel moderator David Isaacson seemed to agree with Swigert. The senior vice president at Hackensack, NJ-based legalized gambling industry consultancy Spectrum Gaming Capital created the session slides.
The headline on Slide 4 reads: Digital Market Share Is Concentrated at the Top – FanDuel (Flutter) Is Dominant.
Indeed, despite BetMGM’s top US online casino status, the online gambling operator primarily owned by Dublin-headquartered Flutter Entertainment is No. 1 in sports betting and No. 2 in US online casino.
FanDuel – and to a single-digit percentage extent, Fox Bet – enabled Flutter to hold 51% of US sports betting market share, according to Flutter’s Q2 2022 earnings report.
Industry Leaders on US Online Casino
Online gambling is seeing interest from the Walt Disney Company.
As if to emphasize Disney’s interest cements mainstream acceptance of online betting, Caesars Entertainment CEO Thomas R. Reeg said on stage at ECGC:
This is a sea change.
Gambling in digital channels is the “most exciting thing” he’s seen happen in the gambling industry in 30 years, Reeg said.
He likened it to the push in many states to legalize riverboat gambling.
Because times change, some operators are now moving those boats onto land.
BetMGM as Synecdoche
Nygaard-Andersen continued with that optimistic tone yesterday:
Our underlying momentum is good. In the first half, we outperformed our main competitors in key markets, and we expect that to continue.
It is this underlying momentum that demonstrates the strength and resilience of our business as our customer focus continues to drive a broader and more recreational player base.
Reminiscent of the riverboat paddle wheels that were larger than houses, US online casino is seeing massive waters part as momentum picks up.
For the top US online casino operator, that means “becoming profitable during 2023, probably to the latter part of the year,” Nygaard-Andersen said yesterday. “And that is really the first milestone for us.”
BetMGM’s milestone may foretell a bright future. Sunglasses on, the US online casino industry will be watching.
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