What happened
Sport-entertainment company ESPN is integrating with sports-betting company DraftKings (DKNG 1.63%), 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.
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.
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.
