DraftKings announced that it has entered into a multi-year agreement with ESPN to become a co-exclusive sportsbook provider and exclusive daily fantasy sports provider of the media giant, pushing shares up 17% on Monday.
Shares closed at a new record of $48.62 after Draftkings (DKNG) said that as a result of the partnership links across ESPN digital platforms will connect fans to DraftKings’ products and services.
“ESPN helped revolutionize the 24/7 sports news cycle and continues to be the go-to source for many fans today on the latest and largest sports stories,” said DraftKings CEO Jason Robins. “We look forward to this collaboration to exclusively showcase DraftKings’ daily fantasy content and offerings while also advancing further visibility and mainstream adoption of our regulated sports betting products.”
Under the terms of the agreement, DraftKings will integrate its products and offerings across ESPN’s digital platforms. The sports gaming company will also run existing and future ESPN studio shows with dedicated segments for promotion, beginning with daily fantasy sports.
As part of both the daily fantasy sports and sportsbook media integrations, applied within select states, links to DraftKings’ products will be deployed on the ESPN website and will be available via mobile and desktop along with the ESPN Fantasy app.
Shares in DraftKings have more than doubled since their Nasdaq debut at the end of April. (See DraftKings stock analysis on TipRanks).
Despite the share frenzy, Oppenheimer analyst Jed Kelly sees room to raise the stock’s price target to $55 from $50, saying that DKNG is benefiting from built-in advantages such as brand recognition and lifetime value (LTV)/customer acquisition cost (CAC) efficacy position, which will allow the company to remain a market leader at maturity.
“We believe DKNG/DIS were a natural fit for partnership. We see this as a slight near-term benefit given that DKNG has already been a heavy advertiser on ESPN properties,” Kelly wrote in a note to investors.
The analyst, who has a Buy rating on the stock, estimates for the US legal sports wagering market to grow about 43% annually, reaching about $8B by 2025, and $14.4B by 2028 as more states regulate sports gaming, and expects DKNG to achieve 25% market share.
Overall, DKNG boasts a Strong Buy analyst consensus which breaks down into 9 Buys versus 5 Holds. Meanwhile, the average price target of $48.33 implies that shares are fully priced at current levels after their 345% rally year-to-date.
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