DraftKings Is Royal Idea as Canada Embraces Conventional Sports Wagering
Posted on: November 30, 2020, 07:40h.
Last updated on: November 30, 2020, 09:22h.
DraftKings (NASDAQ:DKNG) is a gaming equity for investors to consider, as Canadian policymakers mull legislation that will allow betting on individual sporting events, according to one analyst.
On Monday, Credit Suisse analyst Benjamin Chaiken highlighted the stock as a play based on recently introduced bills in Canada that pave the way for single-game betting. Those proposals, one of which was filed last Thursday, enjoy bipartisan support.
We think the Ontario opportunity is underappreciated (not in the ’21 guide or our estimates) and it sounds like there could be future momentum in other provinces as well,” said Chaiken in a note to clients.
Home to the capital of Ottawa and Toronto — Canada’s largest city — Ontario is the biggest Canadian province by population, with 14.57 million residents. That’s a hefty percentage of the country’s total population of 37.59 million. Four professional teams that play in US-based leagues also reside in Ontario — the NHL’s Maple Leafs and Senators, the NBA’s Raptors, and and Major League Baseball’s (MLB) Blue Jays.
Not Accounted for in Current Estimates
For years, Canadian sports bettors have been able to wager on parlays, but not single games. Provincial lotteries oversee the current offering, which generated $500 million for those governments. But that’s a meager percentage of what gamblers in the Great White North are sending offshore in order to gain access to a fuller menu of wagering options.
With the idea of Canada permitting single-game wagering being a recent phenomenon, Credit Suisse’s Chaiken says the potential upside from the proposals being signed into law isn’t baked into DraftKings stock. The analyst has an “outperform” rating and a $76 price forecast on the name, implying upside of 44.34 percent from last Friday’s close.
“Assuming full legalization in Canada, we think this could be a $4 billion revenue opportunity, none of which is in our estimates or street expectation,” writes Chaiken.
Under a proposal introduced by David Lametti, Minister of Justice and Attorney General of Canada, provinces and territories would have the ability to manage single-game wagering, granting gamblers avenues for placing bets in regulated land-based and online venues.
Beyond DraftKings, analysts are highlighting other operators as potential winners in Canada, including Flutter Entertainment (OTC:PDYPY), because that company’s FanDuel unit already has a daily fantasy spots (DFS) footprint in the country.
Much of Wall Street’s enthusiasm for DraftKings this year revolves around the thesis that more states will sign off on sports betting, and Election Day 2020 proves that’s happening.
Massachusetts, Michigan, Ohio, Louisiana, Maryland, and Virginia are expected to join the live and legal sports wagering fray in 2021. Michiganders are currently allowed to bet at retail sportsbooks, with online and mobile wagering slated to start in 2021. Experts say the odds are 50/50 that Ohio will pass sports betting legislation before the end of 2020.
The Bay, Buckeye, and Great Lake States combine for almost 10 percent of the US population, representing lucrative opportunity for DraftKings and rival operators.
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