DraftKings launches online casino in PA, gets Morgan Stanley overweight rating

DraftKings has received permission from the Pennsylvania Gaming Control Board at its April hearing on Wednesday to go ahead and begin the three-day soft launch phase, with a target go-live date of May 1. In addition, Morgan Stanley initiated coverage Thursday on the sports gambling stock with an overweight rating and a $23 price target, nearly 20% up from Wednesday’s closing price of $19.40 per share.

DraftKings went public last Friday in a reverse merger with blank-check company Diamond Eagle, with Diamond Eagle’s stock becoming DraftKings’ stock. Morgan Stanley analyst Thomas Allen wrote in a report that the company was “almost a pure play” on the early innings of legalized sports gambling in the U.S.

While the coronavirus pandemic is crimping sports wagers now, with sports competition on hiatus and casinos closed, he expects that states’ deteriorating budget conditions will lead to a push for gambling. Tax revenue for states will drop significantly amid the economic weakness stemming from the pandemic, and state governments may find sports betting and online gambling to "be the answer" to replace lost revenue.

With states continuing to legalize sports gambling - only 17 have fully legalized it so far, according to ESPN - industry revenue could explode by a factor of eight, to $12 billion in 2025, Allen said. Before Covid-19 shuttered almost all organized sports in March, DraftKings forecast that market revenue for online sports-betting and online casino games could hit $40 billion in the U.S., The Wall Street Journal reported.

DraftKings shares recently traded at $19.31, down 0.47%. They have gained 10% since going public last week. The stock, which was Diamond Eagle before last Friday, has soared 33% over the last three months.

Today, @DraftKings begins the soft launch phase for its casino product in Pennsylvania pic.twitter.com/J9RaRwwg4W

— DraftKingsNews (@DraftKingsNews) April 29, 2020

Already available in New Jersey, DraftKings’ casino is hosted by its sportsbook app. While in New Jersey it is one of nearly 20 online casinos, DraftKings will be one of only a handful of casino apps in Pennsylvania, Crossing Broad reports. The move into Pennsylvania comes at a time when online casino gaming is seeing a surge in popularity due to so many traditional casino customers being stuck at home.

In New Jersey, DraftKings online casino offers live dealer blackjack in their own custom branded studios. Live dealer games are not yet available in Pennsylvania.