Choppiness in the gaming industry as evidenced in December numbers should stabilize in 2025, per a note from Jefferies Equities.
Analyst David Katz said over the past couple years, the gaming environment can be characterized by choppiness, which they continue to see in the most recent foot-traffic data. In December, foot traffic, app downloads, and social-media engagement showed weakness across the industry.
“Although we saw strength with Churchill Downs, which outperformed its peers and saw foot traffic increase 14% year-over-year, the peer set experienced negative traffic, Katz said. “That is in line with initial monthly gaming results. In our view, the growth for Churchill Downs can be attributed to the company’s recent opening of The Rose Gaming Resort.”
Looking ahead, Katz anticipates trends will continue to stabilize in 2025 as comps have been challenging versus prior-year levels. Additionally, Wall Street remains on guard for the impact of macro trends on earnings levels, including higher costs for insurance, utilities, and labor, that have challenged markets unevenly, he added.
When it comes to online sports betting downloads and web visits for operators, results were mixed, Katz said. App-download rankings remained relatively unchanged, with Bally’s leading the group. RSI and Bet365 have also seen improvements regarding app downloads, both up 27% year over year. On the other hand, there were several notable web visit shifts, with Fanatics and ESPN Bet gaining six positions and two positions, respectively, relative to the peer set in the month, Katz said.
In addition, DraftKings app downloads were down 29% year-over-year in December as a result of markets maturing and competitors ramping products during the NFL season. Web visits were up 1% year-over-year, Katz noted.
Top stocks and themes investors are asking about include IGT, given the request for proposals on its expiring Italy Lotto contract, Katz said. With the shares down 10 basis points this year, investors are focused on the valuation in the shares, coupled with the pending lotto contract and the pending sale of its gaming business in the second half of 2025.
“The conversations focus on the prospects for alternative bidders and the potential loss of the contract which IGT has held since the 1990s. History suggests a very low likelihood of IGT losing the contract given its performance has been strong. The financial terms of the contract itself are largely unchanged. The focus on Flutter/Sisal is appropriate, but not necessarily binary, meaning they do or do not bid. We consider the notion that it could become a minority participant in the contract. Nonetheless, the valuation for IGT is unarguably low at 5.6 times 2025 EBITDA, but embodies two substantial event risks of the lotto contract and pending sale of gaming that weigh on shares for now.”
Jefferies’ 2025 and 2026 gaming outlook is bullish on DraftKings, Rush Street Interactive, Sportradar, and Gambling.com Group. They believe that growth in the sector continues, with Missouri going live and new states such as Minnesota, Texas, Georgia, South Carolina, and Oklahoma debating legalization. There’s ongoing double-digit growth in the earliest states, in-game betting growth, and igaming as a steady grower.
Jefferies increased its U.S. total area market estimate to $50 billion by 2030 versus from $37.5 billion previously. They raised their 2025 estimates slightly and launched above-consensus 2026.
“Volatility remains for B2C players and far less so for B2B providers,” Katz said.
Katz highlighted ICE Barcelona, saying it should present some important strategic updates regarding land-based and digital gaming suppliers. Among their key meetings include Light & Wonder updating its land-based product lines given the Dragon Train legal issue and the degree to which it impacts product momentum and earnings power. There will be digital gaming products and corporate updates in the industry as well.
