DraftKings Soars as Illinois Again Nixes In-Person Sports Betting Registration
Posted on: August 25, 2020, 12:11h.
Last updated on: August 25, 2020, 02:13h.
DraftKings (NASDAQ:DKNG) stock is higher by more than nine percent in late trading. That’s as analysts are highlighting the benefits of Illinois Gov. J.B. Pritzker’s (D) recent decision to again temporarily eliminate in-person registration for online sports wagering accounts in the state.
In July, the governor declined to renew an order that halted in-person registration, news that sparked a sell-off in DraftKings and other sports betting stocks. The decision then caused investor fretting about the specter of clients potentially having to drive multiple hours from the Chicago area to the nearest casino or racetrack to simply set up a mobile account.
It was revealed late last Friday that Pritzker is temporarily scrapping the live registration requirement, and that decision is garnering applause among analysts covering DraftKings.
We view this as an incremental positive for DKNG given that the in-person registration at Casino Queen in East St. Louis (~4.5-hour drive from Chicago) puts them at a customer acquisition disadvantage to operators closer to the Chicagoland area,” said Oppenheimer analyst Jed Kelly in a note to clients.
It’s not known for how long the in-person registration requirement will be frozen. But it will run through at least Sept. 1. That perhaps indicates Pritzker wants to permit sportsbook operators doing business in the Prairie State to capture as many new clients as possible in advance of the start of the NFL season. That league’s first game is on Thursday, Sept. 10.
There’s no denying the allure of the Land of Lincoln for gaming companies. It’s the sixth-largest state, and, by some estimates, its sports betting market will easily be the largest in the Midwest and perhaps the biggest in the country, eventually topping New Jersey and Nevada when it fully ramps up.
There’s also no getting around the impact Illinois sports betting headlines can have on shares of DraftKings and its rivals. Benchmark analyst Mike Hickey sees significant opportunity for DraftKings in Illinois, with the state’s sports wagering market potentially growing to $700 million or more.
The analyst adds that given the combination of limited visibility on how long Pritzker will keep the in-person registration stipulation on hold, a condensed sports calendar and the imminent start of the NFL season means DraftKings will likely spend significantly on customer acquisition and marketing in Illinois over the near-term.
He believes those expenditures could pay dividends over the long-term, given the opportunity set available with gamblers in sports-crazed Chicago, the third-largest US city.
Hickey has a $45 price target on DraftKings stock, implying an upside of 25 percent from Monday’s close. Earlier today, the name traded above $40, albeit briefly, for the first time since late June, and is on pace for its best intraday performance in two months.
The consensus price forecast on the name is $45.70. Nine of the 11 analysts covering DraftKings have very bullish or bullish ratings on the stock, while two are “neutral.”