DraftKings Analyst Talks Golden Nugget Deal: 'This Alignment Is A Smart Move'

DraftKings Inc DKNG became the latest gambling stock to complete a major merger deal earlier this week when the company announced a $1.56 billion buyout of Golden Nugget Online Gaming GNOG.

Bank of America analyst Shaun Kelley said there are plenty of things for DraftKings investors to like about the Golden Nugget acquisition.

A Lot To Like: First, Kelley said the deal immediately boosts DraftKing’s iGaming market share.

Golden Nugget’s largest state market share is in New Jersey, where it accounts for 9% of all iGaming. Kelley estimates Golden Nugget will boost DraftKings’ national iGaming market share by about 4%, which will put it a distant second behind MGM Resorts International MGM and its BetMGM app.

Second, Golden Nugget gives DraftKings access and optionality in key markets, especially in Texas. Texas currently has some of the most strict gambling laws in the U.S., but it could be a massive new market at some point in the future.

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New Products And Impressive Team: Finally, Kelley said the Golden Nugget deal adds new products to the DraftKings portfolio, particularly the Nugget’s LiveDealer capabilities. LiveDealer is a way for gamblers to play classic casino table games online and still interact and chat with a human dealer in real time.

“We were impressed with GNOG and CEO Thomas Winter at our March Sports Betting Event and believe this alignment is a smart move for both sides that should improve DKNG’s competitive position, revenues and long-term margin structure,” Kelley wrote in a note.

Bank of America has a Neutral rating and $60 price target for DraftKings.

Benzinga’s Take: Investors should keep an eye out for more potential deals in the online and sports gambling space in the near future. The Golden Nugget buyout came just days after Penn National Gaming, Inc PENN announced a $2 billion buyout of Score Media and Gaming Inc SCR.