By Senad Karaahmetovic
Shares of DraftKings (NASDAQ:DKNG) are up about 5.5% in pre-open Friday after Bloomberg and the Action Network reported the company is close to agreeing to a new, large partnership with Walt Disney's (NYSE:DIS) ESPN.
In a recent interview with the media, ESPN Chairman Jimmy Pitaro confirmed that the company is looking for a major sports betting partner.
"We know that sports fans are craving not just more sports betting content, but they’re craving the ability to actually place bets in a seamless fashion from their online digital sports experiences," Pitaro said.
Oppenheimer analysts reflected positively on media reports of ESPN and DraftKings having advanced talks over a long–term deal.
"We see any agreement providing more odds' integrations to better direct consumers to wagering opportunities that accelerate same-Game Parlay (SGP) and live betting adoption. We believe DKNG is in a favorable negotiating position as the only operator with the budget scale to meet DIS partnership standards, following FanDuel's investments in its own OTT channel, and operators scaling back advertising (Caesars/BetMGM)," the analysts said in a client note.
While the Bloomberg report noted Disney was looking for $3 billion for an extended deal, the analysts believe any agreement is likely to be "well under the $3 billion."
"We see a closer operating partnership, combined with DIS 4% DKNG ownership, providing a solid floor (potential acquirer) for the stock. We believe an announcement could be made before or around the start of the NBA season (Oct. 18th)," the analysts concluded.