Why Disney Deal Makes DKNG Stock a Worthy Wager

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It’s no exaggeration to say that DraftKings (NASDAQ:DKNG) is on a roll lately. The sports wagering company already established a multi-year collaboration with Amazon (NASDAQ:AMZN). Plus, DraftKings posted outstanding second-quarter 2022 results. That’s not all, though, as the next leg up in DKNG stock could come on the heels of a possible tie-in with Disney (NYSE:DIS).

I say “possible” because nothing is written in stone yet. Cautious investors must always bear in mind the potential for a “buy the rumor, sell the news” scenario.

That said, DraftKings is unloved in the financial markets and just needs another catalyst to put it back in investors’ favor. Could a deal with a sports media mainstay do the trick?

DKNG Stock Is Looking for a Reason to Rise

The simplest way to characterize DKNG stock in 2022 is with two D’s: down and directionless. The shares started near $28 at the beginning of the year, only to flop around and hover near $17 in early October.

That’s not what most folks would call “winning,” but don’t count DraftKings out just yet. First of all, it’s possible that the market hasn’t properly priced in a second quarter that was, by any reasonable evaluation, truly exceptional for DraftKings.

Starting with the top line, DraftKings generated $466 million in revenue, up 57% year-over-year (YOY). This also beat the $439 million estimate that analysts had expected.

Now checking the company’s bottom line, DraftKings posted a quarterly net earnings loss of 50 cents per share. Wall Street, meanwhile, had modeled a net loss of 75 cents per share. Thus, while DraftKings is still working toward profitability, the company is nonetheless doing better than anticipated.

Working With Amazon, and Maybe Disney Too

There’s nothing like a big-name collaboration to put a company in the spotlight. Indeed, it was a major development when DraftKings announced that it had established a multi-year deal with Amazon last month.

Together, the two companies would provide pregame content and betting offers “every Thursday throughout the NFL season,” according to the press release. Clearly, this is a major win, as it will allow DraftKings to get exposure to Amazon’s massive user base.

You know what other company has a massive user base? Disney. And more specifically, Disney-owned ESPN. Imagine what a coup it would be for DraftKings to strike a deal with a sports network with the size and reach of ESPN.

Actually, this could become a reality soon. Not long ago, the Action Network reported that, according to “sources,” DraftKings and ESPN are “on the cusp of signing an exclusive partnership … that [would] have shows and perhaps odds integrated into game broadcasts.”

I know what you might be thinking right now: “Buy the rumor, sell the news.” The thing is, there was never a huge “buy the rumor” moment. Perhaps cautious traders are just waiting for the ESPN-DraftKings deal to be sealed. If that happens, the price action in DKNG stock could be explosive.

What You Can Do Now

Make no mistake about it — this is a risky bet. You’ll need to have a speculative side to your personality if you plan to invest in DraftKings now.

Still, it seems like the market hasn’t fully priced in DraftKings’ past successes and possible future deal with Disney/ESPN. So, consider DKNG stock a worthy wager, as the post-deal price move could be major.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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