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Analysts at Macquarie Equity Research have concluded they are “cautiously optimistic” on US gambling consumer behaviour.

The gaming and lodging analysts argued consumers in February and March had returned to more stable behaviour following a difficult January.

Despite potential risks including declining saving rates, rising credit card delinquencies and high interest rates, the analysts remained positive around the activities of the domestic consumer.

“Historically, given the higher levels of debt leverage, our coverage universe historically outperforms during declining interest rates periods, which could act as a H2 tailwind,” they said in a research note published yesterday (26 March).

The firm released the note following its 9th Annual Consumer Bright Ideas Conference, which saw more than 20 B2C businesses attend.

Online gambling prospects

Macquarie remained bullish on US online gambling, which grew 31% year-on-year in January, comprised of 38% OSB and 19% iGaming growth respectively.

This was driven by a 12% OSB hold, which more than offset a reduced hold around this year’s Super Bowl.

However, the analysts noted the hold rate would be lower for operators without a robust same-game parlay offering to compensate for the negative game outcome.

Analysts said they are positive on the sector, expecting a Q1 2024 online market growth rate of 23%. For the full year, they predict a 19% increase overall.

“We still believe there could be positive iGaming legislation in the next 12 months, although this is not in our estimates, but highlight that we expect +22% organic iGaming growth in 1Q,” they said.

The positive predictions also extended to suppliers in the space, which Macquarie said could experience industry over-performance in 2024.

Macquarie bullish on ESPN Bet

The analysts also remained bullish on Penn Entertainment, which was the stock assessed as having the highest potential upside at 94%, with a target price of $33.

Macquarie said Penn management expects ESPN Bet to benefit from product improvements including a “more robust” SGP offering.

This should lead to more time spent on the app and higher spend per user, leading to a boost in market share, management claimed.

Other potential tailwinds include the possibility of deeper media integrations with the ESPN app, as well as access to its database.

“As the company now has a rapidly growing database to leverage… the company is positioned for significant cross-play and omnichannel synergies,” said Macquarie.

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