Loop Capital Explains the 9% Selloff in DraftKings Inc. (DKNG) And Why They Would Buy Before Friday
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Loop Capital analyst Daniel Adam reiterated a Buy rating and $105.00 price target on DraftKings Inc. (NASDAQ: DKNG) after ahares closed ~8.5% lower following a media report by LSR and a sellside note stating that the future of online sports betting in NY was allegedly “hanging by a thread.” Senator Joe Addabbo Jr. appeared to be pointing a finger at Gov. Cuomo for the governor’s apparent unwillingness to find common ground with the legislature on OSB. According to the LSR article, Addabbo was quoted as saying, “…So if [the Senate] and the Assembly are lockstep then that means the governor didn’t negotiate well. That means it was like my way or the highway.” The market now appears to be discounting a scenario in which legalized online sports betting will not be included in NY’s budget this year.
The analyst suggests buying shares ahead of the budget deadline stating "is it also possible that Addabbo was simply playing politics vis-à-vis this morning’s press leak? We would not dismiss that possibility either, meaning there could still be hope for online sports betting in NY this budget session. Accordingly, we like the risk/reward for DKNG shares ahead of Thursday’s budget deadline. If we are wrong, it will likely be on the timing of OSB legalization in NY, not whether it happens. What matters more, in our view, is that the secular tailwinds favor legalization across an increasing number of states (not just NY), which should benefit online gaming operators, particularly the market leaders like DKNG."
Shares of DraftKings Inc. closed at $58.81 yesterday.
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