The logo for DraftKings on a laptop
Gabby Jones/Bloomberg
New York’s plan to allow mobile sports betting in the Empire State is good news for DraftKings but less so for Penn National Gaming, according to Loop Capital.
Gov. Andrew Cuomo and legislators put the plan in their recently agreed upon state budget. The hope is that taxes from mobile gambling will help close New York’s budget gap.
Ultimately, four or more online sports betting operators will be allowed in the state after a competitive bidding process that favors companies that have relationships with the state’s tribal casino operators.
DraftKings (ticker: DKNG) runs a sportsbook at the tribal casino del Lago Resort & Casino, notes Loop analyst Daniel Adam, who put a Buy rating on the stock and a $105 price target. Penn National (PENN) recently struck a partnership with Rivers Casino, but that setup is less advantaged in the bidding process, Adam said.
The analyst has a Sell rating on Penn.
Shares of DraftKings rose 0.6% on Thursday but are up 32% so far this year, compared to the S&P 500’s 8.9% gain. Loop’s price target on DraftKings implies a potential 70% gain from the current price.
Shares of Penn rose 1.7% on Thursday and are up 20% this year.
Mobile and online sports betting is gaining traction as states look to raise revenue. North Carolina lawmakers are also proposing allowing it there to cover the cost of school construction.
DraftKings and FanDuel are poised to benefit from the trend, according to Oppenheimer analyst Jed Kelly, who reiterated his Outperform rating on DraftKing stock on Wednesday, with an $80 price target.
“Well capitalized players with a strong presence in N.J. and large customer data-bases such as DKNG and Fanduel are well positioned” when New York’s plan goes live in late 2021 or early 2022, he said.
Cathie Wood’s ARK Invest bought 600,000 shares of DraftKings, according to her disclosure on Wednesday
FanDuel is the largest U.S. online betting operation. In December, its owner Ireland’s Flutter Entertainment increased its stake to 95% in a a $4.2 billion deal. Last month Flutter said it was considering a listing of part of FanDuel, something that has been the subject of speculation.
DraftKings listed publicly last summer. Casino giant MGM dropped a bid earlier this year to buy the owner of the Ladbrokes brand, but is forging ahead with its online sports betting venture BetMGM.
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