bettingmarket

At the end of February 2020 DraftKings announced fourth quarter and full-year 2020 financial results. For the three months ended December 31, 2020, DraftKings reported revenue of $322 million, an increase of 98% compared with $162 million during the same period in 2019 and more than one-third above the Wall Street consensus estimate for sales of $233.2 million. An Ebitda, loss of $87.9 million was also better than the adjusted Ebitda loss of $112.8 million forecast by analysts. DraftKings also raised its full-year 2021 outlook, forecasting revenue between $900 million and $1 billion. That is up from a prior range of between $750 million and $850 million and reflects strong performances in new online betting states such as Michigan and Tennessee. On March 9 the company raised its long-term net revenue forecast to $5.4 billion, up from $3.7 billion and its long-term adjusted earnings before interest, taxes, depreciation, and amortization target to $1.7 billion from $1.2 billion.

On March 3, in a clear sign of the future trajectory of the industry, DISH Network and DraftKings announced a strategic agreement across DISH's portfolio of brands to bring DraftKings' sportsbook and daily fantasy experiences directly to DISH customers, beginning with a first-of-its-kind DraftKings app integration on the DISH TV Hopper platform. The agreement also allows for subsequent DraftKings sportsbook and daily fantasy experiences with DISH Network's SLING TV and Boost Mobile in the future. DISH TV customers with an internet-connected Hopper family receiver will be able to access the DraftKings app to view betting odds and fantasy contests. They can initiate bets or contest entries with DraftKings directly from their TV, then set recordings and watch the live sports that correspond with those bets or fantasy teams. This is yet another significant positive for DraftKings as it seeks to consolidate its position at the top of the nascent U.S. online betting market space.

Flutter Entertainment reported that for the period ending December 2020 its U.S. online betting market concern FanDuel had achieved Q4 market shares of 40% in online sports betting and 20% in iGaming. The company said that its average number of monthly players in the US was up 62 per cent yoy, whilst US betting revenues had increased 81 per cent to £695m in 2020.

Flutter Entertainment reported that as regards Total addressable market ("TAM") in the U.S. betting market space it now expected the TAM for its US brands to exceed £14bn ($20bn) in 2025, a material upgrade to its previous estimate, primarily due to: "An increase in our estimated value of sportsbook and gaming driven by the spending patterns we are seeing in the early states in which we have gone live (e.g. New Jersey, Pennsylvania and Michigan). An increase in the number of states that we expect to regulate sports betting and gaming; we now expect online sports betting to be available to 65% of the US adult population by 2025 while gaming is expected to be accessible to 16% (previously 50% and 11% respectively)."

Early results out of the state of Michigan revealed that Flutter (FanDuel) and DraftKings were very much dominating the field in the early months of operation.

Tennessee which launched mobile-only sports betting only back in November, generated more than $200 million in sports betting revenue in January; an increase of 16.6% compared with the previous month. These results pushed all time gross sports betting revenue to $49 million and wagers to $523 million, beating the previous record for an opening three month period that was held by Indiana. The numbers out of Tennessee alone, reflect the degree and extent to which analysts have under estimated the scale and scope of the nascent U.S. online betting market.

As things currently stand a very supportive macro backdrop pertains; further US stimulus on the cards; improving corporate earnings; increased vaccine production leading to better vaccination rates ultimately leading to a less restrictive lockdown, an increase in household savings, significant pent up demand, a likely acceleration in PMIs from Q2 and the potential for an upward surprise growth spurt.

The best long-term scenario centres around the notion that eventually online betting will be available in 50 states in the US. In the shorter term simple pent-up demand is going to fuel consumer spending in places like Vegas - benefitting those with land based operations - but they are likely to be badly impacted by worsening relations between the US and China (the upending of the Macau Casino Trade).

Morgan Stanley recently pointed out just how much free cash there is on the sidelines in the US: "Cumulatively, the Covid-19 recession has cost US households US$400 billion in income, but they have already received more than US$1 trillion in transfers (even before the late December and forthcoming rounds of stimulus). Households have already accumulated US$1.5 trillion in excess saving, which is set to rise to US$2 trillion (9.5% of GDP) by early March once the additional fiscal package is enacted." And whilst the popular narrative is that it will all be spent on penny stocks, we can be sure as hell that quite a bit of it is going to be contributing to a rebound in regional gambling and further growth in online sports betting.

How Much Money Will Biden's New Stimulus Checks Inject Into The U.S. Betting Market? Stimulus checks are currently penciled in at c.$405bn in Biden’s plan, and so, if recipients were to "invest" just around 1% of those future stimulus checks into the online betting market (that is, gamble them away) that gives us a maximum of around $4.5bn that could go into US betting accounts based on our math. There is little doubt that regardless of the actual amounts invested the Biden stimulus checks will be accelerating growth across industries like the nascent online U.S. betting market. A veritable online betting boom ahead and that is something that no industry model that we have seen has managed to capture. There may be some hope for Portnoy yet.

Regarding the future growth trajectory of the U.S. online betting market space Morgan Stanley recently said: “While it's risky to predict legislative rollouts for Gaming-related causes, our extensive channel checks suggest that 2021 should stand out as an exceptionally strong year of legalization, driven by COVID-related budget deficits. We expect AZ, CT, KS, KY, LA, MA, MD, MO, OH, OK, SD, and TX to legalize sports betting in 2021, NY to legalize online sports betting, Ontario to legalize, and 2-3 states to legalize iGaming, setting up an attractive catalyst path for those exposed to the theme.”

To the downside - hardly rocket science - unpredictable covid evolution and the failure to develop multi-variant vaccines. This is a very crowded playing field - as ever, everybody wants a slice of the action, which in the short term is going to lead to an increase in promotional costs as competition for market share heats up.