ESPN betting boom drives Pennsylvania entertainment company shares higher
Penn Entertainment (NASDAQ: PENN ) was named one of the best-performing gaming stocks on Monday amid excitement surrounding the launch of new mobile sports betting app ESPN Bet.
The regional casino operator launched ESPN Bet in 17 states on Nov. 15 with the launch of its new iGaming brand, Hollywood Casino, debuting in Michigan, New Jersey, Pennsylvania and West Virginia on the same day. Data suggests bettors will at least skip Penn State's new offer.
ESPN Bet dominated initial download activity and charts, proving it is attracting customers. Bank of America analyst Shaun Kelley wrote: "As of last Tuesday, ESPN Bet was the No. 1 or No. 2 free app in the iOS Store, with 865,000 cumulative downloads and a 4.8 App Store rating, not even including NFL Week. daily data." in a note to customers.
He upgraded Penn's rating to "buy" from "neutral" while raising his price target to $30 from $27, driving the stock's gains today. Penn shares were up 7.33% in late trading on volume well above the daily average.
ESPN Bet Likely Winner at Penn Network
After years of failing to associate its respected brand with a sportsbook, ESPN announced in August that it would partner with the University of Pennsylvania to create ESPN Bet. Under the agreement, Penn will pay ESPN parent company Walt Disney (NYSE: DIS) $1.5 billion over 10 years.
Penn also granted ESPN $500 million in warrants that will allow the network to purchase approximately 31.8 million shares of the casino company, which will vest pro rata over 10 years, meaning Disney is in some way Prices for regional casino operators will be affected by stock increases and decreases.
Penn State was reportedly neither ESPN's first nor second choice when it came to partnering with the gaming company. However, the casino operator's financial offer combined with the network's need to be more directly involved in sports betting may have sealed the deal. Going forward, the agreement is likely to benefit both parties.
"We believe ESPN Bet creates an asymmetric risk-reward trade-off as 1) initial download and app activity was much stronger than expected, 2) initial product showed promotional discipline, and 3) Q3 returns steadily improved." Results is above expectations for PENN's core gaming business," Kelly added.
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Many investors have viewed Penn as an online gaming company since the company acquired a 36% stake in David Portnoy's Barstool Sports in January 2020. The stock disappointed after a meteoric rise in 2020 as it failed to keep pace with FanDuel and DraftKings (NASDAQ: DKNG ) in terms of online sports betting market share.
Regional casinos remain the primary driver of profit and revenue for Penn State, which may be an undervalued attribute as the operator faces less competitive pressure in markets such as Atlantic City, New Jersey, Chicago and Tunica, Mississippi.
Bank of America's Kelly noted that Penn is cutting costs and has less room for margin disappointment because its margins haven't risen quickly in the wake of COVID-19.
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Source: www.casino.org
