Super Bowl: Bets near US$1,4 billion on the NFL final; game is this Sunday.

Super Bowl Sunday is a unique annual experience. Full of over-the-top contests, prime-time entertainment, celebrities, and lots and lots of games. Not only on the field but also in the betting. Therefore, experts estimate that the volume of bets will reach US$1,4 billion on the National Football League (NFL) game between the Kansas City Chiefs and the Philadelphia Eagles, according to a Bloomberg report echoed by Infomoney.

This only accounts for the legal sports betting channels. Countless more will be placed in risky private transactions as well. Combine that with the global reach of the spectacle, and it's safe to say that millions of viewers worldwide will be glued to their phones on Sunday night, monitoring their bets across various gambling apps.

In the main betting houses in Brazil, the Kansas City Chiefs are considered the favorites, with odds ranging between R$ 1.68 and R$ 1.82, averaging R$ 1.77, while the Philadelphia Eagles pay between R$ 1.94 and R$ 2.10, averaging R$ 2.04. The betting sites consulted were... Aposta Ganha, Betano, BETesporte, BetNacional, Betpark, Betsson, Betsul, Caesars, Betting House, Lucky Sports, EstrelaBet, Fazobetai, H2bet, KTO, MrJackBet, Multibet, Oleybet, Onabet, PagBet, King of Pitaco, Stake, Online Luck e Superbet.

Betting stocks are down.

But beyond the Super Bowl, the gaming world is looking at the stocks of gaming companies, which have plummeted since the pandemic. An index that tracks the sector has fallen 39% from its all-time high in March 2021, while the S&P 500 has risen 52% over the same period.

DraftKings Inc. shares have fallen 41% since setting a record high in March 2021. MGM Resorts International – whose BetMGM Sportsbook is a joint venture with England's Entain Plc – has sunk 32% from a July 2023 high. And Caesars Entertainment Inc. shares have fallen 70% from their peak in October 2021. Bucking the Trend is the parent company of Fanduel Flutter Entertainment Plc, which set a new record in early December.

“It was certainly a difficult year for gaming in 2024,” said Barry Jonas, an analyst at Truist Securities. “On the sports betting side, the underperformance can be attributed to both legislative uncertainties and reduced margins.”

Revenue is still high.

Even so, gambling companies are still raking in a lot of money. The U.S. commercial gaming industry earned approximately $67 billion in total revenue from casino games, sports betting, and iGaming in 2023, marking three consecutive record years, according to data from the American Gaming Association (AGA). Last year was likely another of the highest revenues ever, with AGA estimates of $70 billion in revenue.

“You typically get 100 million viewers at the Super Bowl,” said Chad Beynon, a gaming analyst at Macquarie. “It’s a good time for some of these betting apps to show people where they’ve improved the product.”

What stock prices reflect, however, is that growth is slowing and restrictions are increasing. Gaming revenue in the Las Vegas strip fell 2,7% in December, marking the sixth consecutive month of year-on-year decline. In Macau, companies are facing pressure from consumer pessimism in China. Not even the NFL is helping to lift revenues back to previous levels, as this football season was the worst on record for sports betting companies.

Online games

Online gambling companies like DraftKings and Flutter have expanded rapidly since 2018, when the Supreme Court cleared states to legalize single-player betting. Currently, 38 states and the District of Columbia are open for business. But now they are facing rising state taxes and increased competition. The debuts of betting apps in new states have slowed, with only two market launches last year.

Regulations and taxes

The Federal Safe Bet Act, which was introduced in Congress late last year, seeks, among other things, to limit how sports betting companies use artificial intelligence to attract players. Meanwhile, Connecticut has proposed limiting the percentage of betting operators, known as waitlists. And Massachusetts is looking to implement accessibility checks for bettors.

At the same time, local governments continue to tax the gambling industry to help address budget deficits. Just this week, Ohio Governor Mike Dewine introduced a new budget that would double the state's tax rate for sports betting operators from 20% to 40%. This follows a recent proposal by Maryland Governor Wes Moore to double gambling taxes from 15% to 30%.

Reflection in the revenue

All of these industry challenges are starting to show up in company earnings. Flutter said its 2024 US revenue will be $370 million below its guidance of nearly $5,8 billion, due to the impact of the slowdown in sports betting in the country in the fourth quarter. DraftKings also lowered its 2024 revenue and profit forecast after its third-quarter results.

Las Vegas Sands Corp., which derives most of its revenue from Macau and Singapore, reported net income above estimates. However, its shares have fallen 16% this year. MGM, Caesars, and Wynn Resorts Ltd. are due to report their results in the coming weeks, but analysts are already bracing for underperformance due to difficult comparisons with last year, when Vegas hosted the inaugural Formula 1 Grand Prix. MGM and Caesars have seen their share prices fall by more than 20% by 2024, as they are heavily reliant on traffic.

“While increased taxes on sports betting are inevitable, we expect legalization to restrict illegal activities in the market,” writes BMO Capital Markets analyst Brian Pitz.
In search of attractions

To keep the good times going, the US gaming industry is looking for catalysts to attract players. For example, a single bet that combines multiple outcomes or a parlay, called a parlay, offers a higher payout than traditional single bets. Fanduel has developed technology that offers more parlay options. And DraftKings is testing a monthly subscription service that would give customers access to better odds.

For land-based casinos, the path seems to lead far from Las Vegas. Caesars generates more than half of its business outside the city, and MGM receives slightly more than half of its revenue there. The two companies operate about two dozen properties combined along the Vegas Strip.

Another area of ​​growth is iGaming, an umbrella term for online casino games, including Blackjack and virtual poker. It is only available in seven US states, but the gaming industry is optimistic that increased regulations will make lawmakers more likely to pass legislation to support its adoption.

Entry into newly legalized markets and further penetration into existing ones are the biggest drivers of industry growth, according to Chip Skinner, portfolio manager at Royce Investment Partners, who took on a role at DraftKings in the third quarter.

“Management isn’t standing still,” he said of DraftKings. “They’ve expanded their platform to include online casino games and regional lottery offerings, with the vision that there are many cross-customer opportunities.”