MGM Resorts: BetMGM Winning Revenue and Profits in the Sports Betting and IGaming Market

There was a lot to like in BetMGM’s MGM (50% owned by no-moat MGM) first-half 2023 update, which showcased growing revenue and profitability. We think BetMGM/MGM’s omnichannel presence positions it to be one of the long-term winners in the North American sports betting and iGaming markets, which we see reaching $40 billion in sales by the end of the decade versus just over $13 billion in 2022. We maintain MGM’s $51 fair value estimate, leaving shares near fair value.

Net revenue reached $944 million in the first half of 2023, with same-state growth of 25%. BetMGM maintained its full-year sales target of $1.8 billion-$2.0 billion, although it expects to achieve the higher end. We plan to maintain our $2.1 billion forecast, as we expect strong activity during the NFL season.

BetMGM offered more signs that leading operators, which also include DraftKings, FanDuel, no-moat Caesars, and no-moat Penn, are experiencing improving profitability. Specifically, BetMGM reached EBITDA profitability in its second quarter and expects that to endure in the second half of the year. Encouragingly, same-state customer acquisition costs improved 8% in the first year, which we think is aided by improving utilization of customer data. In turn, net gaming revenue margin (which includes all promotions) improved 300 basis points in the first half over the previous year’s period. Further, all launches through 2022 are in positive contribution territory, aided not only by improving acquisition costs but continued play, with older vintage (players from 2021 or earlier) revenue per player up 65%.

BetMGM is live in 26 jurisdictions, amounting to about half of the U.S. population. It has the leading share in iGaming and is generally the number-three player in sports betting, behind just FanDuel and DraftKings. We still expect around a handful of states to legalize sports betting and iGaming over the next several years, supporting industry growth.