DraftKings Teases Breakout On Barstool Sports Deal Talks

DraftKings on Wednesday afternoon rallied to its highest level since late 2021 after reports the online sports betting leader is nearing a deal with Barstool Sports. DKNG stock broke out on the news before closing shy of a buy point.

DraftKings (DKNG) is in advanced talks for a sports betting deal with Barstool Sports, the sports and pop culture media company founded by David Portnoy, Sportico reported. The deal would encompass a traditional marketing partnership in which Barstool promotes DraftKings odds. Barstool would benefit from customers referred to the sportsbook, but will not lend its brand to a sportsbook or betting app.

The discussions revolve around a multiyear deal where DraftKings will pay Barstool in the "low eight figures" per year, according to those familiar with the matter. However, Barstool is unable to finalize a betting deal until after the Super Bowl on Feb. 11 due to a lockup as part of its recent separation from Penn Entertainment (PENN).

Last summer, Disney (DIS)-owned ESPN partnered with Penn on a gambling sportsbook. As part of that deal, Penn rebranded its Barstool Sportsbook as ESPN Bet and will use ESPN Bet exclusively. Penn agreed to pay ESPN ESPN $1.5 billion cash over 10 years, plus $500 million in warrants to buy PENN stock. In return, it will get exclusive rights to the ESPN Bet trademark in the U.S. for the next 10 years. ESPN Bet launched on Nov. 14.

That Penn-ESPN deal sent DKNG stock tumbling in early-mid November.

Gambling Growth

In a Nov. 14 investor presentation, DraftKings noted that betting participation is larger and growing faster than previously anticipated in multiple states. The company expects the OSB and iGaming total addressable market in states where DraftKings operates to leap from $20 billion in 2023 to around $30 billion in 2028.

Elsewhere, DraftKings on Jan. 11 launched its sportsbook in Vermont, marking the 26th U.S. state in which it operates, as well as in Ontario, Canada. Meanwhile, mobile sports betting is set to roll out in North Carolina on March 11, according to the state lottery. Operators including DraftKings, ESPN Bet, FanDuel, BetMGM, Caesars Sportsbook, bet365 and more are likely to launch on that date. The November forecast did not include Vermont or N.C., but added that sports gambling legalization is likely to expand to new states and areas.

DraftKings Stock

DKNG stock popped as high as 40 Wednesday afternoon, hitting its highest levels since November 2021 according to MarketSmith. DraftKings pared gains to close just below a 38.97 buy point for an awkward-looking double-bottom base. The buy zone, which extends 5% beyond the buy point, extends to 40.91.

Investors also could use 39.35, the top of the base, as a buy point.

DraftKings stock has rallied more than 9% so far this year.

PENN stock fell 2% to 23.47, reversing lower from resistance at the 200-day line.

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