Financial Analyst Sees Explosion in Sports Betting Industry in 2021General News
The sports betting market had an up-and-down 2020. Like many other industries, the COVID-19 pandemic had an undeniable effect on sports betting last year. With many professional and collegiate sports shutting down for an extended period of time, sports betting came to a complete standstill in the spring and for parts of the early summer.
And while the pandemic has continued to force sports leagues to make significant changes, investors see a huge explosion in the sports betting market in 2021.
Last week, Shaun Kelley, an analyst for Bank of America, said he expected that the sports betting and iGaming markets could grow by more than 70% this year. Fueled by sports' return to play and the expansion of betting legislation around the United States, the market is expected to grow at unprecedented rates despite the looming presence of the pandemic.
More States Passing Sports Betting Legislation
One of the biggest drivers of the projected growth in the sports betting industry is looming legislation in a number of states across America. Kelley recently told investors that he forecasts that as many as 27 states could have legalized sports betting by the end of this year.
If that is true, that would account for 49% of the entire U.S. population. In the first half of 2021, Virginia and Michigan are expected to roll out official sports betting operations. Both states have passed legislation but haven't officially begun offering wagers yet.
Kelley also said that the second half of the year could see definitive action from states such as Connecticut, Maine, Massachusetts, Ohio, Georgia and New York. In New York, Governor Andrew Cuomo is expected to reveal his support for mobile sports betting as part of his annual State of the State address.
If this all proves to be true, it would continue the upward trend in sports betting adding a significant portion of the U.S. population to legalized betting markets. In 2018, 10% of the population was added into the sports betting market. In 2019 and 2020, that number was 23%.
It's possible that this year and next year could combine to add another 24% of the U.S. population to the sports betting market.
How This is Affecting Stock Prices
As an advisor for Bank of America, Kelley's angle on sports betting is from an investor's perspective. As part of his call with investors recently, he gave his outlook on stocks that are specifically in the sports betting industry.
He gave DraftKings Inc. a neutral rating. The reason for this was not because he believes the company has a poor overall outlook, but that it has a high marketing spend and a cost structure that isn't as attractive to investors as other stocks.
Penn National Gaming, meanwhile, has a more positive outlook, with a price target of $104, Kelley said. Churchill Downs had a positive rating, with Kelley suggesting a buy on the stock. He said the company has a strong brand with the Kentucky Derby, as well as an accelerated growth profile with the online platform of TwinSpires.
In the casino world, Kelley said he expects the sector to recover rapidly in the second half of 2021. That will be fueled, of course, with restrictions loosening in states as the pandemic eases, as medical professionals expect. With the widespread distribution of COVID-19 vaccines expected to ramp up by late spring and summer, that could lead to casinos being allowed to welcome more and more patrons in late summer or early fall.
Of course, this same situation would apply to land-based sportsbooks, which could help fuel even more gains in the sports betting industry. This would be particularly true in states that haven't passed mobile sports wagering laws.
The Pandemic is Still Affecting Sports
The COVID-19 pandemic is still raging across the United States, and as such, it will remain a significant factor in the performance of the sports betting industry. While it's unlikely that sports leagues will go into full shutdown mode again, the pandemic continues to affect sports on a daily basis.
The NBA has already had multiple games canceled in just the first few weeks of its new season. The NHL is set to begin its shortened 56-game schedule this week, but already, at least one team will be starting late due to virus-related situations.
The NCAA announced that its annual men's basketball tournament is set to be held exclusively in and around Indianapolis. The hope is that a "normal" March Madness tournament will be held, but it's uncertain if that will prove to be possible.
Even with some cancellations and delays, though, sports leagues are in much better shape now than they were in the spring of 2020. And that should provide more stability, and the possibility for extreme growth, in the sports betting industry.