Kings for a day; Covid’s casino kingpin

As you know, DraftKings is the current darling of Wall Street, its stock hovering around $50/share. Today Credit Suisse analyst Ben Chaiken initiated coverage with an “outperform” rating, putting a $76/share price target on the stock. He even went to far to call the stock “undervalued.” Given what we’ve seen from DKNG so far, that does not strike us as the least bit over-optimistic. Wrote Chaiken, “the structural growth story is still in its infancy. DKNG has access to only ~18% of the population with mobile betting, and line of sight opportunity to a few other states. As was seen following ‘08/’09, the legalization of land based gaming almost doubled, and we think a similar dynamic could occur post-COVID with sports betting, as states look to fill in budget gaps.”

As for as-yet-untapped California, it “alone represents 12% of the U.S. population vs DKNG’s existing penetration of ~18% … DKNG is the only pure-play US mobile sports betting name. While there is concern over valuation by some in the investment community, we don’t think that it fully captures the accelerating growth pipeline available to DKNG or the earlier stage in its own lifecycle relative to peers.” Chaiken’s bet is, he acknowledges, not without risks. States have to keep on legalizing sports betting—we’re not too worried on that front—and major-league sports have to keep plugging away in the face of Covid-19, which is much more of a question mark. Just ask the NFL. Perhaps, as Colin Jost suggested on Saturday Night Live, we should make NBA Commissioner Adam Stern the next president. He knows how to maintain an impenetrable Covid bubble … and was the first commish to get on board with legitimate sports betting, to boot.