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This News Sent DraftKings Stock Soaring to All-Time Highs on Monday

By Jon Quast – Sep 14, 2020 at 2:25PM

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The company is entering into an exclusive arrangement with ESPN.

What happened

Sport-entertainment company ESPN is integrating with sports-betting company DraftKings (DKNG 1.27%), according to a press release from DraftKings. DraftKings stock had traded lower in early trading before news of the co-exclusive arrangement sent shares soaring. As of 2 p.m. EDT, the stock is up 14% and hitting new all-time highs.

Today's pop follows strong movement over the past week, as investors bid DraftKings stock higher in celebration of the return of the NFL.

DKNG Chart

DKNG data by YCharts

So what

ESPN is one of the most recognizable names in sports, with media assets across television and radio attracting a large audience. It's owned by ABC (a subsidiary of Walt Disney) and has its own fantasy-sports options online and on mobile devices. Per today's press release, DraftKings is now the exclusive provider of daily fantasy sports for ESPN.

DraftKings will also be the co-exclusive sportsbook (where bets are made) for ESPN with its fantasy-sports options. In short, the deal will feature DraftKings on one of the biggest sports networks there is, providing enhanced exposure to ESPN's large audience. 

A businessman rides a rocket ship expelling cash exhaust over a multi-colored bar chart.

Image source: Getty Images.

Now what

Trading at close to 47 times trailing sales, growth stock DraftKings must find multiple growth avenues to justify the premium valuation assigned to it. Many investors believe the increasing legalization of sports betting coupled with international expansion will help the company over the long term. But today's news helps as well; DraftKings could acquire new users in this deal.

That said, having already run so high in 2020, it's fair to wonder if today's news was more than priced in already for DraftKings stock.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.

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