Matthew Walker, from Japanese bank Nomura, has massively raised his target price for the satellite broadcaster from 700p per share to £10, reports The Daily Telegraph.
Under the analyst's new target price, Sky would be worth £17.5 billion, substantially more than the around £12bn previously mooted. The price rise would result in News Corp having to pay an extra £3bn to take the firm private.
Last month, the Sky board rejected an approach of 700p per share from News Corp for the remaining 61% of Sky that it does not already own.
However, the board members said that they would entertain an offer from News Corp worth over 800p per share, with the two parties now keeping the lines of negotiation open.
In a note to investors today, Walker said: "For too long we think BSkyB has been regarded as the perennial 'jam tomorrow' story, a best-in-class business that keeps investing to keep ahead of the competition and where promised cash flow is constantly deferred.
"We would argue that the recent News Corp proposal is a strong signal that at last the company is about to harvest that cash flow."
Sky's shares have risen 22% on the back of the takeover speculation, closing yesterday at 700.5p per share.
Meanwhile, Sky News has confirmed talks with an Abu Dhabi-based private investor to launch a 24-hour Arabic news service
The channel, which would be Sky's first foreign language channel, would operate in the Middle East and North Africa as a direct competitor to Al-Jazeera.
"Discussions are progressing well and we look forward to bringing a new approach to Arabic-language news," said Sky.