Overseas expansion could be a lucrative growth opportunity for
-US iLottery business presents a sizeable growth opportunity for
-The US market appears a logical opportunity, but a number of entry barriers remain
-Domestic market continues to grow, opportunity remains with LotteryWest
Leveraging its software-as-a-service offerings should allow
While the US lottery market is valued at around
With only 14 jurisdictions having legalised iLottery products, compared to the 46 US jurisdictions where legacy lottery is operational, significant potential remains in the space. Having only recently legalised iLottery, both
For Jumbo investors, there are a couple of things to note. While entry to the US lottery market appears a logical expansion opportunity, it is important to note that market analysts consider this a long-term opportunity and value creation is not anticipated in the near-term. Some analysts have also highlighted a lack of detail on the company's path to the US market at this point.
Additionally, while there appears to be room for growth in the US market, analysts have noted that the growth outlook for iLottery sales has moderated recently, and there is possibility for other online gaming products such as iGaming and Wagering to take share in key markets.
The tendering process for US iLottery licences is also competitive, and analysts note the market is skewed to instant products rather than the draw-based products that Jumbo has expertise in. Contracts for draw-based and iLottery licenses are exclusive, and although generally short-term, they tend to have high renewal rates which presents a barrier to new market entrants.
Closer to home, there remains opportunity to acquire the full Western Australian LotteryWest digital contract, where online sales account for 18% of the current total
Lottery sector performance during economic downturns
While consumers are already tightening spending as inflation increases, market analysts note lottery sales are largely resilient to economic cycles. Market data have suggested Jumbo will receive cumulative benefit as trends demonstrate new player spend has increased spending over time. Further, market analysts have noted a global shift in consumer preferences, with consumers showing a preference for digital in major markets.
Three of four FNArena database brokers covering Jumbo have updated forecasts in the last month, and all have Buy (or equivalent) ratings, with an average target price of
According to Morgans,
Morgans analysts also find the resilience of the lottery sector appealing in the current economic climate, and anticipate large jackpot activity to increase in coming years given the changes recently made to the Oz Lotto game, which typically drives new customer acquisition. Morgans retains an Add rating and decreases its target price to
Analysts from Macquarie noted real near-term value creation opportunities exist for
Given the competitive nature of the US iLottery licence tendering process, Macquarie suggests Jumbo could seek out a reseller agreement with an existing iLottery operator, but notes this path does inhibit the company's growth in the market. Macquarie is Outperform rated with a target price of
Goldman Sachs -- not a database broker -- anticipates the next twelve months will be a period of product and growth investment for
While Goldman Sachs analysts see opportunity in the US market, the broker noted lottery typically lags online sports betting legislation by as much as 18 months and predicts the company can achieve a total transaction value of
The broker retains a Neutral rating and decreases its target price to
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