iGaming 2025 Legislative Outlook Dim, Analyst Says
The new year is merely a week in, yet forecasts for additional states to legalize iGaming in 2025 seem bleak, as noted by one analyst.
In a recent report about DraftKings (NASDAQ: DKNG) — one of the gaming stocks poised to gain from additional states adopting online casinos — Deutsche Bank analyst Carlo Santarelli noted that the operator's capacity to achieve or surpass 2025 earnings and revenue guidance is crucial, as there is expected to be minimal legislative action to boost the shares.
"Given current valuation, as well as the hiccups in 2024 with respect to guidance, we see the achievability of the 2025 target as the single biggest driver of shares,” noted Santarelli. “Further, we believe an inability to deliver 2025 guidance will cast significant doubt on longer-term adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) targets of $1.4 billion in 2026, which could be further exacerbated by the current valuation dynamic.”
In the realm of sports betting legislation, Texas holds significant importance; if the state does not authorize this type of wagering this year, it will probably be postponed until 2027. Santarelli noted that for commercial operators like DraftKings to launch in California and Florida, they will need to form partnerships with tribal gaming organizations, and these agreements “are likely to be undesirable, thus excluding both states from the promising prospects and placing them alongside New York, where the overall market is considerable but profitability is difficult.”
iGaming Forecast Gloomy
At present, only seven states — Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island, and West Virginia — permit online casinos, and no additional states joined in 2024.
Santarelli mentioned that six states might take up iGaming legislation this year, but he remarked that only two are expected to sanction that type of gambling. He stated that the two largest among those six states are not expected to take that action.
“Of the subset of New York, Ohio, Illinois, Indiana, Maine, and Maryland, we believe Ohio and Maryland have the best prospects for near-term (2025) success, though we believe the most likely scenario is 2025 being void of newly legalized states,” Santarelli said. “We see New York and Illinois, the two largest states in the discussion, as having the slimmest odds of success.”
His list excludes Wyoming, where iGaming legislation was introduced last month. Because Wyoming has the smallest population of all states, even if it legalized online casinos, it would probably have little impact on the stocks of DraftKings and its rivals.
DraftKings Might Pursue Acquisitions
Santarelli noted that DraftKings possesses a solid cash position and isn’t burdened by significant debt, allowing it to pursue mergers and acquisitions to enhance topline growth, especially if it seems likely that short-term goals might be missed.
Santarelli mentioned that acquisitions are expected "to continue being a vital part of DraftKings' strategy, particularly if meeting the guidance targets in 2025 or 2026 seems elusive."
Last year, DraftKings purchased Simplebet Inc., a company offering microbetting services, and the online lottery service Jackpocket.
