Gold rush: US could turn into jackpot for gambling firm
PADDY Power Betfair believes profits from its US division could hit $600m (€532m) within a number of years if more states legalise sports betting.
In a research report, Davy Stockbrokers said the US is "potentially very valuable" for the group, but warned that the pace of regulatory changes there will be a key driver for Paddy Power Betfair.
Paddy Power Betfair merged its US business last year with American firm FanDuel, taking a 61pc stake in the combined entity and giving it access to about eight million customers.
It is hoping that more states will legalise sports betting, with seven having so far done so.
Davy Stockbrokers said it has previously estimated that the US sports betting market is likely to expand to a meaningful size by 2023, when it could be worth between $4.7bn and $8.5bn (€4.1bn and €7.5bn).
"We caution that the key driver of the US opportunity will be the pace of market regulation," it said yesterday.
"However, should the market evolve even along the lines set out by the company, we see few reasons why it could not achieve this aim," it added.
At a recent investor presentation, FanDuel told analysts it is assuming the US market will grow by 10 times the size of the New Jersey market, where sports betting has been legalised. The New Jersey market is currently worth about $600m.
"However, it was also clear that it ultimately expects the market to be bigger than 'just' $6bn over time," noted Davy. "Its ambitions are therefore greater than the profit scenario it presented."
Paddy Power Betfair spent £95m (€110m) on sales and marketing activities in the US last year to attract gamblers to its sports betting business.