Morgan Stanley Expects 17% CAGR in US Online Gaming Revenue by 2026

Leading global investment bank and wealth management firm, Morgan Stanley, has started the year presenting its outlook on the US gambling industry. 

The interesting outlook highlighted the “single highest growth opportunity” when it comes to consumer discretionary sectors, due to a projected 17% compound annual growth rate (CAGR) in online revenue for 2023-2026.

The firm, which is committed to technological innovation, added that its assumptions for the online casino world were toned down because of the slow-going legislative processes in 2024 and 2025, as well as the anticipated leveling expected at the end of a period marked by excellent growth. 

Rescheduled Launch Dates 

A series of online sports betting and casino markets were subject to rescheduling by Morgan Stanley analysis, including North Carolina with a launch date moved on to mid-2024, or Maryland’s online casino market with an estimated launch date set to the fourth quarter of 2024. 

Colorado’s iGaming launch was rescheduled for 2026 instead of the original 2025 timeline. Indiana’s launch was also moved from late 2024 to 2025. Iowa has, on the other hand, completely exited the firm’s considerations.

The effects of these reschedulings were seen in the firm’s sports betting Total Addressable Market forecasts for 2024 ($13.4 billion), 2025 ($15.5 billion), and 2026 ($16.9 billion). 

At the same time, iGaming TAM forecasts spoke of an expected increase of around 20%, to $7.1 billion, $8.8 billion, and $10.5 billion during the same three years.

The outlook did not cover US states that have not officially regulated gambling. 

Online Sports Spending to “Meet and Potentially Exceed Mature Markets”

The prestigious analysts also argued that the current spending levels on sports betting recorded in the US have already gone over the numbers in the UK while almost reaching the Australian figures.

In the context of the increasing number of US states choosing to legalize sports betting and the maturing market itself, Morgan Stanley expects to see these spending levels turn into percentages of individuals’ consumption expenditure, possibly meeting and exceeding mature markets.

In terms of preferred stocks, the firm mentioned DraftKings as one of its “most preferred overweights” due to their $40 share price target.

Las Vegas Sands was cherry-picked in the brick-and-mortar category, with its $59 price target while a newcomer in the sports betting world, Fanatics, was described as a “possible surprise” due to its popular sports brand and powerful tech stack.

As for the reputable leaders in the market, FanDuel and DraftKings, Morgan Stanley expects to see them holding on to their positions by harnessing their scale advantages to get rid of the majority of their competitors.

While Flutter and DraftKings recorded excellent share returns last year, challengers like Fanatics, bet365, and ESPN Bet have brought back concerns regarding the uncertainty of profit margins and heightened promotions.

Last October, Gateway Casinos, with its flagship property, the Grand Villa Casino, announced it enlisted Morgan Stanley’s financial services along with those of Macquarie Group Ltd. in an attempt to find the right investors or acquirers for its properties.