Why BofA Sees $2B Opportunity In Canadian Sports Betting

Although BofA Securities sees DraftKings Inc. DKNG and FanDuel as the initial captains of the sports betting space, analyst Shaun Kelley said both Penn National Gaming Inc. PENN and MGM Resorts International MGM “are formidable opponents” that continue to grow market share in the states where online gambling is legal.

BofA's Sports Betting Takeaways: MGM, through its BetMGM platform, currently holds the No. 1 spot for online sports betting in Colorado and Tennessee, but is also gaining market share in New Jersey and Pennsylvania, Kelley said in a Thursday note.

Similarly, Penn National, through its BarStool Sportsbook app, took a 24% market share in Michigan when online sports betting went live on Jan. 22, second only to DraftKings in the Wolverine State, the analyst said. 

For the states that have reported growth in online sports betting, Kelley said January saw 10% growth month-over-month and 111% growth year-over-year.

January’s jump was likely due to the Super Bowl, the analyst said, adding that he expects volatility in the sector throughout the year based on the cyclical nature of the sports calendar.

BofA On iGaming: Kelley’s expectations in the iGaming subsector were far exceeded, he said, with states reporting over 200% growth over the last 12 months.

Only one-third of the states that allow online sports betting also allow iGaming, the analyst said, adding that the potential market for iGaming is about 70% larger than that of online sports betting.

BofA sees DraftKings, BetMGM and FanDuel as continuing to lead in iGaming this year by gaining market share in the space, he said. 

BofA On Industry Growth: Although there will be some lulls in the sector when major sports teams aren’t in season, Kelley said this is likely to be offset by more states and Canada legalizing online sports betting and iGaming.

In the U.S., the analyst said the states to watch are New York, Massachusetts, Arizona, Ohio, Connecticut, Georgia, Kansas, Louisiana and Maryland, all of which are at various places within the legalization process.

Canada took the next step this week in legalizing sports betting nationally when its House of Commons voted 303-15 in favor of the bill Wednesday.

With Canada's market estimated to be a $2-billion industry at maturity, DraftKings, Penn National and Skillz Inc. SKLZ are ready to enter the online betting playing field in the country, Kelley said. 

Similarly, Canadian online sports betting companies such as FansUnite Entertainment Inc. FUNFF, Score Media and Gaming Inc. TSCRD and Bragg Gaming Group Inc. BRGGF are all looking to get a head start in the Canadian market while also expanding in the U.S., according to BofA.