A Wall Street analyst forecast 30% growth in North American online gaming revenue by the of 2024, followed by slower growth in 2025, ramping up again in 2026 with the potential of igaming expansion to additional states.
Chad Beynon with Macquarie Equity Research issued a report that shows the 30% growth for the year is expected to be followed by 11% in 2025, then shoot up to 27% in 2026. For 2024, he expects online sports betting to grow 34% year over year, while igaming grows 24%.
There was a 34% year-over-year growth during the second quarter for the online gaming market, which broke down to 39% for sports-betting revenue and 27% for igaming, Beynon said.
The second-quarter growth of 34% came in ahead of expectations, despite flattish online sports betting hold, Beynon said. Based on New York data, hold was neutral for DraftKings, Flutter, and Rush Street Interactive on a year-over-year basis, but a drag for Caesars Entertainment and MGM Resort International.
“Thus, we think North America segments for DraftKings, Flutter, and RSI are set up nicely to outperform in the second quarter,” Beynon said.
As for the second half of 2024, Beynon said that’s off to a good start. The forecast is 20% for the third quarter, according to Beynon; New York held 11% rate for the first week of July, combined with customer-acquisition opportunities for Wimbledon, Copa America, and the European soccer championship.
“For week two, Carlos Alcaraz winning Wimbledon was positive for sportsbooks, while Argentina winning Copa America in extra time versus Colombia was neutral,” Beynon said. “But Spain winning the Euro 2-1 in regulation versus England was a drag. The results should be more positive for RSI, with about 13% revenue exposure to Colombia. For July/Aug, we expect 20%, plus handle growth in the U.S. with less hold volatility and at higher rates (10 to 11% market hold), given seasonality during the heart of baseball season.”
Beynon said September normally accounts for about 50% of third quarter volumes and can be hold-volatile. “Positively, we expect sports betting to continue its mainstream ascent during this football season.”
In May, DraftKings and RSI raised their 2024 revenue guidance to 31% and 36% year over year and 17% to 24%, respectively. Flutter stayed at 36%.
“Given nice hold and lower promo intensity, we think most operators are on track to meet/exceed revenue guidance,” Beynon said. “For EBITDA, we’re lowering our estimates for DraftKings by $46 million in 2024 to account for Illinois’s new progressive tax rate. For 2025/26, we expect a much smaller impact, given prior conservatism and mitigation strategies (lower marketing spend, odds adjustments).”
Beynon said they believe RSI is shielded from this impact, given the graduated tax levels and revenue-share arrangement with Rush Street Gaming.
Macquarie said their top online picks are DraftKings and Genius Sports Limited, trading at 12 times and nine times 2026 EBITDA, respectively. Beynon said both are showing attractive growth at reasonable prices.
Consensus expects DraftKings and Genius to grow at a CAGR of about 75% and 35%, respectively, between 2024 and 2026, with upside from new online sports betting and igaming legislation, Beynon said.
Despite this, DraftKings shares are down 20% from their 52-week high at the end of March (versus the S&P 500 +6%), as negative regulatory headlines broke and Illinois increased the tax rate.
“But we think the sell-off is overdone, as we expect less than 5% impact to EBITDA in 2025, if at all, and see second-quarter earnings as a potential catalyst if investors are reassured of this, despite a lower 2024 guide,” Beynon said.
