U.S. Sports Betting Sector Facing Test During Economic Downturn
Waning Wealth for Gambling Giants, Online Contenders Faring Better
By: Mike Savvy (04/07/2025)
Photo by forextime.com, CC BY 2.0
Key Insights
- MGM, Caesars, and Wynn have endured significant stock losses in the past week
- FanDuel and DraftKings have managed to maintain their stock prices more steadily
- Numerous major financial firms are pondering the genuine likelihood of a recession
Mike Savvy delves into the US online casino scene, supplying readers with exclusive insights they won't find anywhere else. With a background in the retail industry, specifically in Las Vegas, Mike has kept a close eye on the sector and has continued to track its evolution as the online industry has gained traction. Mike covers a wide range of topics, from online casino critiques to current news, making him one of the most trusted insiders in the business. Explore Mike's newest articles at casinos.com to discover his wealth of knowledge!
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Background:
Recent setbacks for MGM, Caesars, and Wynn can be attributed to turmoil from tariffs and US consumer risks, contrasted with FanDuel and DraftKings’ resilience thanks to their digital-first models and sports betting expansion. Let's break it down:
Falling Casino Fortunes
- Tariff-induced economic unease: President Trump's tariff policies have generated apprehension about reduced discretionary spending, negatively impacting companies like Caesars (no international exposure) and MGM. Wynn's shares dropped a staggering 10.6% following the tariff announcement[4].
- Accumulated financial strains:
- Caesars’ slipping prosperity: Transitioned from a $788M net profit (2023) to a $278M loss (2024) due to increasing costs, despite steady revenue[1].
- Digital expansion vs. debt: Despite a 60% YoY increase in iGaming revenue, Caesars' adjusted EBITDA fell short of expectations ($880M in Q4)[3]. High levels of debt remain a concern.
- MGM’s relative resilience: Despite a 10.97% YTD decline (vs. Caesars' 19.34%), MGM has managed to outperform its peers due to the success of BetMGM. However, its Las Vegas exposure still weighs on its performance[2][3].
Sports Betting Stocks’ Stability
- FanDuel (Flutter) and DraftKings reap benefits from digital adoption, zero physical property expenses, and sports betting's growth (for example, Caesars’ digital revenue surge[3]).
- Lower cyclical exposure: Their revenues are less tied to tourism fluctuations or tariff-driven consumer spending decreases.
Recession Predictions and Analyst Outlook
- Market pricing in "grim scenarios": Analysts observe that casino stocks are trading at COVID-era lows, reflecting recession apprehensions[2].
- Mixed signs: Q1 consumer tendencies stayed stable, according to Truist Securities, yet broad price targets were slashed (e.g., Caesars to $38 from $35, MGM lowered)[2].
- Long-term risks: Tariffs could exacerbate consumer spending cuts, disproportionately impacting physical casinos. Digital gaming and debt reduction (like Caesars’ strategy[3]) may provide some protection.
In essence, casinos face structural vulnerabilities to consumer cyclical pressures, while sports betting's digital growth offers relative security. Financial firms expect continued volatility but see potential value in handpicked operators if consumer spending remains strong.
- In the wake of economic uncertainties caused by tariffs and US consumer risks, traditional casino giants like MGM, Caesars, and Wynn have experienced significant stock losses, contrasting the stability of online contenders such as FanDuel and DraftKings.
- Mike Savvy's latest articles at casinos.com delve into the US online casino scene, offering exclusive insights not found elsewhere, with a focus on topics ranging from online casino reviews to current news.
- Caesars, once posting a net profit of $788M in 2023, saw its fortune take a downturn, transitioning to a loss of $278M in 2024 due to increasing costs. On the other hand, digital-first players like FanDuel and DraftKings have capitalized on their resilience, benefiting from their zero physical property expenses and sports betting expansion.
- By adopting a digital-first strategy and focusing on sports betting, companies like FanDuel and DraftKings have lower cyclical exposure, essentially minimizing their reliance on tourism fluctuations or tariff-driven consumer spending decreases.
- Recent predictions from financial analysts suggest that casino stocks are trading at COVID-era lows, reflecting growing apprehensions about a potential recession. However, digital gaming and strategic debt reduction could offer some protection to companies like Caesars, providing them with a better position to weather the storm should consumer spending change.
