2 Reasons To Own DraftKings Despite Risk Related To College Football Hiatus

Wayne Duggan
·2 min read

DraftKings Inc (NASDAQ: DKNG) shares traded lower by 9.5% on Monday, but one Wall Street analyst said investors should be looking to buy the dip given strong iGaming trends from the state of New Jersey.

The DraftKings Analyst: Rosenblatt Securities analyst Bernie McTernan reiterated his Buy rating and $60 price target for DKNG stock.

The DraftKings Thesis: ESPN reported that the Big Ten conference, among others, is prepared to cancel its fall sports season, including football. McTernan said no NCAA sports would be a blow to DraftKing’s business, but he does not believe another pro sports hiatus is on the table.

Regardless, McTernan said DraftKings has the cash to navigate the near-term situation.

MLB and the NBA returned to action in recent weeks with mixed results on the safety front. MLB has canceled 24 games so far due to multiple coronavirus outbreaks.

McTernan said DraftKings fans should look beyond the current sports season and consider a potential long-term growth opportunity in online gambling. In New Jersey, iGaming revenue was up 120% in the second quarter compared to 65% growth in the first quarter.

McTernan said there are at least two reasons to buy DraftKings stock despite the near-term headline risks related to the college sports season:

  • State budget deficits are pressuring lawmakers to legalize online sports betting, creating positive headline risk as well.

  • Both the online sports betting and iGaming businesses are thriving, with sports betting revenue up 30% in New Jersey in June and iGaming revenue up 123% for the month.

“The reason to own shares now is the potential positive headline risk from states accelerating legislation for OSB/iGaming from worsening budgets and strong momentum where legalization has already occurred,” McTernan said.

Benzinga’s Take: Sports fans should know something about the college football season with opening weekend now less than three weeks away. Given DraftKings shares are down 14% in the past two weeks, the stock may already be pricing in cancellation or postponement of the season.

Related Links:

MLB's COVID-19 Struggles May Halt DraftKings Short Squeeze

Why This Analyst Sees 'Slight Hope' For DraftKings In 2020

Photo credit: World Poker Tour, Flickr

Date

Firm

Action

From

To

Jul 2020

Benchmark

Initiates Coverage On

Buy

Jul 2020

Stephens & Co.

Initiates Coverage On

Overweight

Jun 2020

Rosenblatt

Initiates Coverage On

Buy

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