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FanDuel Sports Betting Partnership Gives Fox 34% Upside, Analyst Says

By Rich Duprey - Jun 9, 2021 at 10:11AM

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There are two potential catalysts to spark the stock's growth.

Because of the potential for expanded cooperation between FanDuel parent Flutter Entertainment (PDYPF 3.32%) and Fox (FOX 3.25%) (FOXA 3.38%), 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. 

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Flutter Entertainment and Flutter Entertainment PLC. The Motley Fool recommends fuboTV, Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Fox Corporation Stock Quote
Fox Corporation
FOX
$32.37 (3.25%) $1.02
Fox Corporation Stock Quote
Fox Corporation
FOXA
$34.88 (3.38%) $1.14
DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$19.35 (8.16%) $1.46
Flutter Entertainment PLC Stock Quote
Flutter Entertainment PLC
PDYPF
$108.49 (3.32%) $3.49
fuboTV, Inc. Stock Quote
fuboTV, Inc.
FUBO
$3.84 (6.08%) $0.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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