Historical Horse Racing Revenue Growth Undervalued, Says JMP

Historical horse racing (HHR) machines offer a form of gambling entertainment that enables fans to place wagers on recorded horse races. For years, the activity has been expanding its reach, although it remains significantly less popular when compared to sports wagering which is available in nearly 40 US states.

Currently, there are several states that offer betting on HHR machines. Although the HHR machines are yet to expand and reach more customers, the sector has much untapped potential. Analysts with JMP have described the HHR revenue growth as the β€œunder-appreciated story within gaming,” pointing to the potential it holds, as announced by Next.io.

The expert analysts highlighted the significant 67% compound annual growth rate that saw HHR revenue soar to $1.4 billion in the last five years. Moreover, JMP acknowledged the leadership position of Churchill Downs Incorporated (CDI) for the market. The experts said that the company holds a significant share in the market, pointing out that CDI’s share in 2023 was approximately 60%.

New Opportunities to Benefit HHR Revenue

According to JMP, there are a number of factors that may positively benefit the HHR revenue and CDI’s growth, considering its solid position within the market across the US. For example, the analysts spoke about the potential positive impact of the acquisition of Exacta Systems by CDI. The takeover with a $250 million price tag was announced late in 2022. Last year in August, CDI confirmed it finalized the acquisition of Exacta and according to JMP, the takeover brings new synergy opportunities.

Moreover, JMP predicted that capacity increases in markets such as Virginia can drive between $70 million and $150 million in additional EBITDA. The addition of electronic table games to venues with HRR machines also represents a growth opportunity. β€œThe company will build out the end-to-end suite of products located in a traditional casino, which we estimate to be $150 million of incremental B2C EBITDA in Virginia and Kentucky if approved,” wrote JMP.

Besides Virginia, HHR machines are legal and available in other US states, such as New Hampshire, Louisiana and Kentucky. A testament to the solid presence of CDI within the HHR sector is that it operates 28 out of the total 48 venues available across the country. The company with the second-biggest share is ECL Entertainment, which currently operates five HHR facilities in two states.