Morgan Stanley: New Fox-Stars Sports Betting Partnership Will 'Benefit Both Parties'

Media giant Fox Corp (NASDAQ: FOXA) said Wednesday that its Fox Sports unit will launch a new national media and sports wagering platform, Fox Bet, through an investment in Stars Group Inc (NASDAQ: TSG).

The Analyst

Morgan Stanley's Thomas Allen maintains an Equal-weight rating on Stars Group with an unchanged $20 price target.

The Thesis

Stars is no stranger to partnering with a media asset to deliver sports betting: the company acquired the U.K.'s Sky Betting & Gaming in 2018, Allen said in a Thursday note. (See his track record here.) 

The partnership announced Wednesday "should benefit both parties," he said. 

While Fox's sports lineup isn't as large as Sky's is in the U.K. it is backed by a strong brand with the rights to the most NFL games, the analyst said. Fox is now almost exclusively focused on broadcasting sports and news, and betting could become a meaningful part of its business, he said. 

If Stars controls 10 percent of the estimated $5-billion sports betting market by 2025, the business would be worth $2 per share in a base case scenario, Allen said. It is difficult to model the exact economics of the deal, as it is unclear what share of revenue Stars will keep, he said. 

New disclosures and information may be made available during a scheduled Stars conference call Thursday and Fox's investor day presentation Friday, according to Morgan Stanley. 

Price Action

Stars Group shares were trading up by 14.69 percent at $20.06 at the time of publication Thursday, while Fox shares were higher by 3.06 percent at $38.54. 

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