Betting stocks like DraftKings and Penn Gaming fell on Monday following reports that the Big Ten voted to cancel the 2020 football season. Meanwhile, Rosenblatt raised its price target for DraftKings stock. Yahoo Finance's Myles Udland, Dan Roberts, Akiko Fujita, and Ines Ferre discuss.

Video Transcript

MYLES UDLAND: All right, welcome back to "The Final Round" here on Yahoo Finance. Myles Udland with you in New York. Well, it's been a very busy day in the world of sports. Perhaps the cleanest sports proxy in the market under a lot of pressure here. DraftKings, that stock is down 7%. We're going to get to a call from Rosenblatt on that stock in just a little bit.

But I want to bring in Yahoo Finance's Dan Roberts now for-- for all the news, Dan, that's happening in the world of sports today because we see it in the action with DraftKings that there's certainly a more negative sentiment towards games getting played. And-- and really that focus is on what's happening at the college level. Right now, I-- I guess there's something like a college football season planned. But it seems like within the next 24, 48 hours, that's all going to be falling apart.

DAN ROBERTS: Yeah. And-- and let me just first say on DraftKings stock, you know, the last time this happened, a single-day 8% drop for DraftKings, was very recently when major league baseball had a number of cases on one team, and so one team had its next two or three games canceled. And everyone said, oh, look, all the gaming stocks are down. DraftKings bounced back. In fact, that stock has been remarkably, almost strangely resilient during the pandemic, even before sports came back.

So we'll see what happens with CFB. But I have a feeling that even if CFB gets canceled, you know, let's remember that all the other sports have come back and-- and DraftKings users can play fantasy games and bet on those. So I wouldn't be worried about that stock, even though, you know, it's sort of been strange how much it has risen. I think it's up like 200% since the-- since it went public by merging with an SPAC. Now let's talk about college football. The news today-- and I want to make sure we're-- we're very concrete about this, although it could change in minutes-- it's still only just rumors.

It's still been reported that the Big Ten, and then maybe likely the Pac-12, is likely to or about to announce that it's moving its football season to this spring, that it is canceling its fall football season. Now if that happens, it's a total mess because reportedly, again, the other of the Power Five conferences don't want to do that, aren't ready to do it. And they're considering, even if the Big Ten cancels, still having football. And it's just a reminder to viewers that it's sort of hard to believe, but those Power Five conferences operate completely separately.

You know, there's no college football commissioner. And then a lot of people say, well, there's the NCAA. But the NCAA really doesn't serve that function. The conferences make their decisions separately from one another. But I want to say that as of right now, 3:16 PM on Monday, the Big Ten hasn't actually announced this. It isn't yet official. It's just reported that it's going to. So of course, DraftKings stock felt. Penn Gaming, which took a big majority stake in Barstool, fell. Flutter, formerly known as Paddy Power, that stock fell, although DraftKings is down the most.

Now all that said, you're starting to see Big Ten coaches come out because of those reports and say, we want to play. We're planning on having our season. And also, players coming out and saying, we want this season. Now, of course, players tweeting and saying, we want to play, that alone isn't likely to-- to make it happen. But Trevor Lawrence is one very influential voice, the big Clemson quarterback star who is set to play another season before he can go pro. You know, last year, the big star was Joe Burrow and Lawrence. Joe Burrow went to the NFL.

And I just want to share these tweets from Trevor Lawrence today because it's interesting. Because the reason we're talking about college football maybe getting canceled in the fall, it's all about player safety, right? So Trevor Lawrence tweeted, "People are just as much, if not more at risk if we don't play. Players will all be sent home to their own communities, where social distancing is highly unlikely."

Then he says, "We are more likely to get the virus in everyday life than we are playing football. Have a season-- having a season also incentivizes players being safe and taking all the right precautions. Without the season, people will not social distance or wear masks." Now of course, we can debate that. I'm not necessarily saying that's, you know, medically sound advice, but it is interesting because a lot of the programs have said the same.

And-- and Michigan coach Jim Harbaugh came out and said, look, we're down to zero cases of our last 340 tests that we did. And we're taking all the precautions, and we want to play. So it's going to be interesting. It's a mess because all the Power Five conferences seem to have a different plan. And the MAC canceling its fall football season, I believe, at the end of last week was really the first domino here that now is causing all the others to maybe call it quits, maybe wave the white flag, but maybe not.

AKIKO FUJITA: And just to add to Dan's point, I mean, unless you've got a bubble the way the NBA has created it, you really are subject to where the virus heads. Sure, things may have gone smoothly in Michigan up until now. There's no question if those tests are-- in fact, as Jim Harbaugh says, they have come back negative. And yet, who knows? Who's to say that there is not going to be an outbreak a month from now?

So it's-- it's just so risky, right, especially when you talk about college football, where there's so much travel, so many regions involved. It's not just about bringing in x amount of players into one facility and testing every single day and making sure they don't leave because they-- you simply can't do that in college football. And I think that speaks to-- to the broader risk of just resuming the season.

MYLES UDLAND: Yeah-- yeah, go ahead, Dan.

DAN ROBERTS: Well, and just like the fact that it could still get worse again, of course, it also could get better. But in addition, I wonder, Akiko, you know, when we talk about canceling the fall season, well, why would it be so much better in the spring? Why is the assumption that, oh, we'll push it to the spring? I guess a vaccine, but I don't think that what we're hearing is there would be a widely available vaccine by spring.

And as a result, you wonder why they don't just try to figure out how to play, try to do some form of a bubble. And I'm with you, the bubble works. If you try and return for the season without a bubble, there's no guarantee. That said, look at baseball. You know, they had a rocky start, but baseball right now is happening, and it's not happening in a bubble.

MYLES UDLAND: But it's-- it's only happening for some teams. Some teams are not being able to play. I mean, it is-- it is kind of a mess. But I want to go back to this call from Rosenblatt. On-- on DraftKings, they have a buy rating, $60 price target on shares. Ines Ferre, this is a very interesting stock outside of the call because DraftKings is one of the early SPACs which has really been the hottest trend of this summer. And, you know, we're talking here specifically about the college football program-- or problem for DraftKings, but I-- I think the-- the view that Rosenblatt has is, well, if college doesn't play, pros will probably play.

And it will make up-- they'll make up for it in volume. And so they're basically like, people are going to gamble on anything that's on. And if we lose an entire sport, it might be OK. Now, the market today disagrees with this, but the Rosenblatt thesis is people love sports betting, and that's not going to go away even if there's only x number of sports instead of all of the sports come fall.

INES FERRE: Exactly. And to your point, the Rosenblatt note saying the NBA is doing OK. And it's saying, look, despite this bleaker outlook when it comes to college football this fall, they believe that there's-- another professional sports hiatus is really unlikely. If it were to happen, if you were to see postponements, cancellations, DraftKings has enough cash on hand.

So why buy it now with a price target of $60? That's about double what it's trading out right now. Well, it's saying basically that states are hungry for cash, so you will see online sports betting legislation being accelerated. So it's pointing to states like Ohio, and you're going to see continued momentum in iGaming revenue. That's basically the thesis of this note.

MYLES UDLAND: Yeah, it's interesting, you know, Ines, it comes up to-- to a point that I think we talked about with Dan just last week, Dan, which was that I'm still surprised that not every sport has-- or not every state, rather, has full legalized gambling across the country, and that that's still maybe a revenue driver for states if they need it. And it certainly seems like, unfortunately, state and local budgets are going to need some kind of incremental tax revenue, and here's a great opportunity.

DAN ROBERTS: Well, it's funny that you say you're surprised not every state has it. I actually feel the opposite. That just the other day, I looked at a map now of legislation across the country, states that have gone ahead and legalized sports betting, states where a bill is in motion and it's likely to get passed, but it hasn't yet, and then states where a bill to legalize have failed. And I was just surprised how kind of quickly the map has become mostly legal or about to be legal. Boy, I think it is really growing quickly.

Now maybe the pace of legalization state by state has slowed. But, boy, I mean, we're-- we're up to, like, 20-something states, and it's growing quickly. Now, I will say, some states are never going to do that. I mean, Utah is likely to never legalize sports betting. But it is growing quickly. The other caveat I like to give-- not every state is going to see a huge instant tax benefit from legalizing sports betting. You know, some states, there is a big immediate boom. Remember famously there was, like, one month a year ago when New Jersey had more sports betting handle than Nevada that month.

Now, there were some asterisks there. It was a slow sports season. But for some states, it's going to be great. Some states are going to say, OK, we'll legalize it, and they won't see that much of a benefit. But I do think it's fair to be bullish on the stocks that benefit from sports betting. And also, even if CFB is canceled-- and by the way, that makes it extra sad if CFB is canceled because you're telling me every sport is going to successfully come back except college football? But if that happens, you've got all the other sports to-- to gamble on.

MYLES UDLAND: And-- and, of course, we haven't even gotten to the point where, is the return of sports betting negative for the stock market? I remember that story from back in May, when it was, oh, sports bettors turned Robin Hood traders goosing stocks, and-- and now that bid went away. I guess it's fine because, as you mentioned, the S&P just a few percentage points away from a record high.