BetMGM Overshadowed Sports Betting Player. Analyst Says It Shouldn’t Be.

Posted on: September 28, 2020, 10:21h. 

Last updated on: September 28, 2020, 02:01h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

BetMGM, the sports betting venture of MGM Resorts International (NYSE:MGM) and GVC Holdings Plc (OTC:GMVHF), enjoys the benefit of one of the gaming industry’s most recognizable brands. But it’s often overlooked relative to other online sports wagering rivals.

BetMGM
The BetMGM Sportsbook at MGM Grand Detroit. An analyst sees the business as a growth driver for MGM stock. (Image: Detroit Free Press)

UBS analyst Robin Farley believes investors shouldn’t forget about BetMGM, particularly with a slew of positive momentum building for the domestic sports wagering markets. The enterprise is a 50/50 joint partnership between the Bellagio operator and GVC, meaning the most practical avenue for US market participants seeking access is via MGM stock.

BetMGM is in eight markets today, but by 2025, they believe the market could include 38 states for sports betting and 13 states for online gaming. They see potential market value north of $20 billion,” said Farley in a note.

That $20 billion forecast for online casinos and sports betting is mostly in line with consensus, though some Wall Street estimates are even higher. For patient market participants, the opportunity set is even larger, as some analysts believe that by 2030, 96 percent of the US population will have access to legal online sports betting (OSB).

Getting to Growth

BetMGM is live in five states: Colorado, Indiana, Nevada, New Jersey, and West Virginia. It offers iGaming in the Garden State while it waits for similar regulatory approvals in Michigan and Pennsylvania.

The $20 billion by 2025 forecast is based on internal estimates of 225 million adults across 38 states having access to sports wagering and spending an average $60 annually on that activity. It also posits 62 million adults in 13 states allocating $110 each per year to online casinos, according to Farley.

BetMGM looks to gain a share of 15 percent to 20 percent in any new market it enters, and currently maintains a 16 percent to 17 percent slice of the pie in New Jersey, the largest internet gaming and sports betting state.

“BetMGM sees profitability by year 3 within a given state, depending on tax levels and regulations. They are excited for the potential upside they see from IAC’s stake in MGM and involvement with the joint venture,” said Farley.

Last month, Barry Diller’s IAC/InterActiveCorp (NASDAQ:IAC) revealed a $1 billion investment in MGM stock, which was largely seen as an endorsement of iGaming. Diller’s companies have long histories of converting offline customers to online patrons, and analysts see a big opportunity to do that with MGM’s 34 million M life Rewards members.

Media Talks

While BetMGM has an array of marketing pacts with various professional sports franchises, something it currently lacks is a media partnership. That’s an increasingly prominent theme in the sports wagering space, as several major gaming companies are teaming up with big-name broadcasters.

Farley notes the operator is in talks with unidentified media companies, but it’s not immediately clear what will come of those discussions.

“With many others partnering with media companies like ESPN and CBS, are there uncommitted networks worth partnering with? BetMGM’s focus is on acquiring customers at a good value, and it’s not clear to them if media deals are the best value, though they are talking with media companies,” said the UBS analyst.