New York Represents A Huge Opportunity For Sports Betting: Here's What Could Be Next

The recent state of the state presentation by New York Governor Andrew Cuomo called for New York to push forward with online sports betting.

Cuomo called for New York to operate with a state-sponsored online and mobile sports betting offering to help fill a $15 billion state budget gap.

Why It's Important: New York could become the largest single state to legalize online sports betting. Kelley said New York could be a $250 million market for sports betting revenue in its first year and $850 million at maturity.

“The intentions behind a 'state sponsored' market are unclear, but in general this is less good for commercial operations than a multi-operator competitive market,” Kelley wrote in a note.

The analyst said this could mean three different options for the New York sports betting operations: The state could choose to use the state lottery similar to Oregon and Washington D.C., have a single state-granted operator like New Hampshire or have a more typical multi-operator system.

“State run systems are less productive with handle per adult around 80% below the US average," Kelley said.

Related Link: Sports Betting Could Grow 70% In 2021, Casino Recovery Coming: BofA

Penn National: In the note, Kelley raised his price target on Penn National Gaming PENN from $101 to $115. The new target is based on a multiple of 15x EV/EBITDAR compared to a prior multiple of 13. Upside to Penn National could come from winning additional casino licenses not in estimates by the analyst.

Legislators in New York recently proposed a bill to offer 14 sports betting skins from the seven existing casino operators.

The state could launch online sports betting in late 2021 or early 2022.

PENN Price Action: Shares of Penn National are up 4.7% to $105.14 on Tuesday, earlier hitting a new 52-week high of $106.39.