Morgan Stanley has predicted that the United States online gambling market will be worth $9.3 Billion by the year 2020.
The investment bank released an investor analysis ahead of the debut of the regulated online gaming market in New Jersey, Nevada, and Delaware. It has predicted that the online gambling market would reach an estimated $670 million in its initial year, 2014, and reach levels surpassing the 2012 combined revenues of Las Vegas ($6.2 billion) and Atlantic City ($3 billion). Furthermore, Morgan Stanley has stated that its estimated valuations of the online gambling market are relatively conservative.
Given the forecast, analysts have focused their attention to the stock of Boyd Gaming, who has established a partnership with Bwin.party. Morgan Stanley has set a target price of $12 for the stock and Boyd Gaming shares climbed 10.37% to $9.05 after the release of the analysis. According to Barron’s:
“We view BYD as best positioned stock in our US coverage to benefit from the US online gaming opportunity given its positioning and relative size. BYD currently has a $710 million market cap, is 7x levered, and we expect it to generate $634 million of 2013 EBITDA. The other well positioned operator in our coverage for online is MGM Resorts International (MGM) but it has a market cap of ~$6 billion and we expect it to generate ~$2 billion of EBITDA in ‘13e, making online less of a driver.”
The United States online gambling market was valued at $5.6 billion before the enactment of the 2006 Unlawful Internet Gambling Enforcement Act. Some analysts have speculated that the post-UIGEA black market was equally as strong as the previous legal market.
However, the United States online gambling market included customers from all fifty states prior to 2006. At the moment, only three states have brought about regulations for online gambling and the legislative outlook in other states has been disappointing.
Investment Analysis Firm, Barron’s, initially warned investors about aggressively buying gaming stocks in February. The initial earning projections for the public, U.S.-focused casino and gaming operators are weak and a national law would be necessary to significantly increase profits for this sector.
Although the valuations from Morgan Stanley seem to hinge on several factors (mainly, legislative), the predictions has given some optimism for gaming stock investors and poker players alike.