Sports Betting Monthly Report | March

17 March 2022

Sports Betting ETF Monthly Report: Key Takeaways

DraftKings, one of the leading company in the US online gaming industry, held an investor day on 3 March 2022. [1] Some key highlights :

  • The size of the Total Addressable Market (TAM) is larger than the company expected and they are increasing their North America estimate by 20% from $67m to $80m. 
  • As a specific example, New Jersey Online Sports Betting revenues have increased from $54m in 2018 to $740m in 2021, an increased of 1,270% or 74% cagr. In other states where sports betting is live, the average spend per adult is significantly higher at $13 v $7 in New Jersey.
  • iGaming, which is the key long term profit driver for the industry, has been just as impressive in New Jersey increasing from $123m in 2014 to $1.4b in 2021 or a 1,011% increase. Pennsylvania and Michigan, which went live recently, are reporting significantly better revenue per adult metrics than New Jersey.
  • The legalization of sports betting has been happening at a rapid pace since the overturning of PASPA in May 2018. Currently, sports betting (retail and/or mobile) is legal in 34 states covering 55% of the population. Of which, ONLINE sports betting is legal in 23 states covering 44% of the population. Out of these 23 states, 20 states are currently live with 3 states pending launch. Unfortunately, only 7 states covering 13% of the population have legalizing iGaming (online casino). 
  • The industry is already concentrated with the top three operators typically accounting for more than 80% market share of the states online sports betting revenues. This is typically DraftKings, Bet MGM and Fanduel. 
  • DraftKings is estimating they can achieve between $6.7-9.5b in gross revenues at maturity, given TAM estimates of $80m and market share goals of between 20-30% in the US and 10-20% in Canada. 
  • The company is investing heavily in customer acquisition as new states go live. They expect that new customers will have a 2-3 year gross profit payback. Therefore, new states turn profitable after 2-3 years. The company will generate a positive profit contribution in 2022 in states where they are currently live. The company expects to be EBITDA positive in Q4 2023. 
  • Assuming gross revenues of $6.7b, the company is targeting Adjusted EBITDA of $2.1b, excluding synergies from the Golden Nugget Online Gaming acquisition. This is a 24% increase v the previous EBITDA target of $1.7b.

Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.

 

 

Macro Outlook

  • The US Sports Betting and iGaming market is expected to expand 23x from $2.3 billion in 2020 to $53 billion in 2033, according to Goldman Sachs. [2] Europe and Asia are also expected to be high growth markets. [3]
  • Regulatory changes giving US states the right to legalise Sports Betting and iGaming is the major growth catalyst. Similarly, an easing regulatory landscape in markets such as Macau and Singapore fuelled massive growth in a short period of time. [4]
  • Other growth drivers include spending conversion from illegal to legal platforms, wider social acceptance of sports betting as an entertainment activity, technological improvements and expansion of product offering including in-play betting. [5]
  • Unlike other high growth industries, digital gaming can deliver high margins for leading operators in the near term, with expected EBITDA margins of 25-35% according to Morgan Stanley, DraftKings and MGM. Relatively moderate capex also drives strong Free Cash Flow and ROI metrics. [6]

 

 

Sports Betting ETF Performance (as of 28.02.2022)

 


1M

3M

6M

YTD

12M

SI

Fischer Sports Betting & iGaming UCITS ETF (Acc)

3.42%

-3.29%

-23.15%

-7.57%

NA

-25.96%

Solactive Fischer Sports Betting and iGaming Index

3.47%

-3.10%

-22.91%

-7.48%

-21.41%

-25.59%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 28.02.2022

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. 


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