Macquarie Analyst Predicts March Madness to Generate $4.5 Billion in Wagers

The NCAA Men’s Basketball Tournament, commonly known as March Madness, will resume its action on Thursday with the first half of the Sweet 16 matchups. According to an analysis by Macquarie analyst Chad Beynon, the event is expected to generate an estimated $4.5 billion in legal handle for North American sportsbook operators.

Players of the Texas team celebrate making a shot during a recent NCAA Tournament game. An analyst estimates that the tournament should bring in $4.5 billion in sports betting handle. (Image: SBNation )

In a recent report to his clients, Beynon stated that the first two rounds of the tournament may have been responsible for around 70% of the total sports wagering handle last week. This is due to the large number of matches available for bettors. He also added that the Sweet 16 and Elite 8 rounds combined account for approximately 55% of the total handle each week, while the Final Four and Championship games account for 40-50%. That means that the tournament could be responsible for around 30% of all North American sports bets placed in March and 10% of those in April.

Upsets Change Hold Estimates

Though the large handle is impressive, analysts are more interested in the sportsbook operators’ hold data, which is the percentage of money kept for each dollar bet. Macquarie estimates that the hold through the first two rounds of the tournament was about 7%. This could have been significantly higher had it not been for Fairleigh Dickinson University’s victory over Purdue on Friday, which marked only the second time a 16-seed beat a 1-seed. Princeton’s wins over the University of Arizona and Missouri Tigers in the second round might have also had an impact on the hold percentage.

Beynon noted that while the average hold on Friday, March 17 was -8%, this should have been closer to 4% if not for the Purdue loss. Fortunately, bettors’ preference for betting on overs was a boon to operators over the first two rounds of the tournament, as 67% of the games resulted in an under. He estimates that if the average hold is maintained for the remainder of the month, then the first quarter of 2023 should have a market hold of approximately 8%, with most operators achieving a hold of 100-200 basis points below the market hold.

Macquarie Stock Suggestion, New York Hold Analysis

In regards to the New York market specifically, Beynon noted that FanDuel and Resorts World had the highest February hold, with 9.1% and 9% respectively. DraftKings (NASDAQ: DKNG) and BetMGM, the second and third largest domestic online sportsbook operators, respectively, had holds of 6.8% and 7%. Bally’s (NYSE: BALY) BallyBet posted a February hold in New York of only 1.5%, making it the lowest among operators.

Beynon has given an outperform rating to six gaming stocks with sports wagering exposure, including DraftKings and Caesars Entertainment (NASDAQ: CZR). His top pick, based on potential upside, is Rush Street Interactive (NYSE: RSI); the stock would need to more than double to reach the analyst’s target price of $7.