COVID-19 lockdowns and casino closures have been a major blow to casino stocks. But Morgan Stanley analyst Thomas Allen says 2020 continues to be a huge year for iGaming and Draftkings Inc DKNG.
What To Know
New Jersey iGaming revenue was up 123% year-over-year in the month of June, roughly in-line with its 124% gain in May. The state reported $85 million in iGaming revenue for the month despite a nearly complete shutdown of live sports.
Allen said the June numbers were better than he anticipated given his expectations that casino reopenings and subsiding COVID-19 fears might send business back to casino floors. New Jersey has now generated $423 million in iGaming revenue year to date, up 94% from a year ago.
Allen said the huge success of New Jersey and Pennsylvania iGaming should drive additional states to legalize it as well.
Sports Betting Rebound Ahead?
But while iGaming trends have been robust, sports betting continues to lag. New Jersey’s June sports betting revenue was down 40% to $165 million. Allen is optimistic about a steady recovery given Formula I racing returned on July 5, MLB is returning on July 23 and NBA is returning on July 30.
In terms of market share, Allen said DraftKings and privately held FanDuel remain the clear leaders in iGaming and sports betting.
“We highlight DKNG as the clearest beneficiary of these strong results given it is a near pure play on US sports betting/iGaming,” Alle wrote in a note.
Morgan Stanley has an Overweight rating and $25 price target for DraftKings stock.
Benzinga’s Take
DraftKings shares have nearly tripled so far in 2020, which likely goes a long way in explaining why Morgan Stanley has a bullish rating but a price target below the current share price. If iGaming and online sports trends continue to be positive in the coming months, investors can expect Morgan Stanley to adjust its price target accordingly.
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