Oppenheimer Provides Detail on NYS Sports Book Proposal, DraftKings Inc. (DKNG) Favored
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Oppenheimer analyst Jed Kelly reiterated an Outperform rating and $80.00 price target on DraftKings Inc. (NASDAQ: DKNG) after New York approved a hybrid limited-operator online sports betting (OSB) model based on the RFP process with a high amount of taxes/fees, that well capitalized players with a strong presence in NJ and large customer data-bases such as DKNG and Fanduel are well positioned for when the state goes live in late '21 or early '22. Under the current plan, the NYGC would issue requests for proposals for up to two mobile sports betting operators that have a partnership with at least one of the existing licensed commercial casinos. The NYGC will have until 11/28 to select the winning bid. Those chosen will then have the ability to subcontract out at least four skins to sportsbook operators. The winning operators would pay the same tax rate that is determined through a competitive bidding process and no lower than 12%. The winning operators will pay a $25M licensing fee, significantly higher than any other US jurisdiction, which well capitalized tech providers such as Kambi or the large OSB market leaders are willing to pay.
The analyst stated "the four operators with first-skin agreements tied to upstate casinos are DraftKings, FanDuel, Rush Street Interactive, and Bet365, which could provide benefits in the selection process. The NYGC will give special consideration to tribal gaming partnerships, but will also consider gross gaming revenue estimates and the tax rate bid. We are uncertain if operators PointsBet and Penn National Gaming (NASDAQ: PENN) / Barstool, who have second-skin agreements will be included, but we believe as long as an operator obtains a skin, they will likely be eligible."
Shares of DraftKings Inc. closed at $64.60 yesterday.
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