Morgan Stanley forecasts robust CAGR in US online gaming revenue

Lea Hogg January 11, 2024

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Morgan Stanley forecasts robust CAGR in US online gaming revenue

Morgan Stanley’s latest outlook on the US gambling industry reveals a bullish projection of a 17 percent Compound Annual Growth Rate (CAGR) in online gaming revenue from 2023 to 2026.

iGaming projections altered as legislative process slows down

Analysts at the top-tier investment bank view this as the “single highest growth opportunity” within the consumer discretionary sectors, despite a cautious stance on iGaming due to legislative hurdles.

Apart from looking into altered launch schedules for online gaming platforms in various states, the report also provides insightful stock recommendations.

Top picks

DraftKings emerges as a top pick, marked as one of Morgan Stanley’s “most preferred overweights,” with a target share price of $40. The report highlights DraftKings’ potential for a significant profitability surge in 2024, attributing it to a refined national marketing approach and the maturation of the overall market.

Las Vegas Sands, a land-based giant, is also featured in the report with a set price target of $59. Analysts identify potential outperformance in Macau’s mass market, positioning Las Vegas Sands for a potential re-rating as the market once again views the space as a growth segment.

Intriguingly, the report singles out sports betting newcomer Fanatics as a possible surprise in the sector. Despite stiff competition from established leaders like FanDuel and DraftKings, Morgan Stanley sees Fanatics as having the potential to gain market share due to its well-known sports brand and robust technology stack.

As the report anticipates intensified competition from new entrants like ESPN Bet, Fanatics, and bet365, concerns arise about heightened promotions and uncertain profit margins. While some challengers, such as ESPN Bet, initially showed success relying on promotions, Morgan Stanley foresees a normalization of gross win rates as promotional activities scale back.

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