Because of the potential for expanded cooperation between FanDuel parent Flutter Entertainment (FLUT 0.01%) and Fox (FOX 2.05%) (FOXA 2.02%), the news and sports broadcaster, one analyst believes the latter's stock possesses as much as 34% upside.

Wells Fargo analyst Steven Cahall recently upgraded Fox from equal weight to overweight, which is the equivalent of a buy recommendation, and set a price target of $47 per share. Fox stock closed at just over $35 per share yesterday.

Four men in a living room cheer at the television. One is holding a soccer ball.

Image source: Getty Images.

In a research note to investors, Cahall said there are two catalysts to Fox's stock appreciating 34% over the next few years. The first is the broadcaster's FOX Sports unit acquiring an 18.5% stake in FanDuel next month. The second would be Fox Bet and FanDuel creating a new company that melds Flutter's sports betting app with Fox's non-news business.

Fox Bet was originally a joint venture between Fox and The Stars Group (TSG), a Canadian gaming and online gambling company, of which Fox owned 5%. It also had the right to acquire 50% of Stars' U.S. business over the next decade.

Flutter, though, acquired TSG last year in a $6 billion deal that brought Fox Bet into Flutter's portfolio alongside Paddy Power, BetFair, PokerStars, and FanDuel. With Fox's equity stake transferred into Flutter, it also gave Fox the right to up its equity interest next month.

Cahall says the arbitrage could add 17% to Fox's stock, but it could go higher if Flutter and Fox blend their businesses. There's a good argument to be made for the merger as rival DraftKings recently partnered with Sling TV to launch a sports odds channel and fuboTV is launching a sports betting platform later this year.