Penn Entertainment‘s stock experienced a significant surge after the successful launch of ESPN Bet Sportsbook across 17 states in the United States on Nov. 15.
Ranking among the top-performing gaming stocks, the company’s NASDAQ-designated stock, PENN, experienced a bullish spike of 7% at the close of trading on Monday. Analysts attribute this rapid rise in stock value to the overwhelming success witnessed by the newly introduced sportsbook within its first week of launch.
Penn Entertainment recently entered a strategic alliance with media giant ESPN, marking the launch of ESPN Bet. This partnership move followed the casino operator’s decision to sell its complete ownership of the Barstool Sportsbook, previously acquired for $300 million, back to its former owner, David Portnoy, for a nominal fee reported to be just $1.
The company launched ESPN Bet with its iGaming brand, Hollywood Casino. On its inaugural day, ESPN Bet made a significant entry into Michigan, New Jersey, West Virginia, and Pennsylvania.
Presently, the sportsbook is operational in a total of 17 states, including Maryland, Colorado, Kentucky, Illinois, Arizona, Indiana, Iowa, Tennessee, Massachusetts, Virginia, Kansas, Louisiana, and Ohio, alongside the aforementioned four states. This expansive launch was made possible owing to Penn’s legal betting licenses in all 17 states.
Sports betting enthusiasts in the US have warmly embraced the newly launched ESPN Bet, showcasing immense interest and engagement with the operator. Within its debut week, the sportsbook swiftly climbed to secure the top positions, claiming both the Nos. 1 and 2 spots on the iOS store, interchangeably. Its top position in rankings reflects the remarkable traction gained by ESPN Bet, amassing an impressive count of over 865,000 downloads coupled with a stellar app rating of 4.8.
“ESPN Bet is dominating initial download activity and charts, proving it is cutting through to customers,” Shaun Kelley, Bank of America analyst, said in a statement to his clients.
“ESPN Bet has been #1 or #2 of all free apps on the iOS store since last Tuesday, with 865K cumulative downloads and a 4.8 app store rating, even without data from NFL Sunday.”
Penn’s stock experienced an increase in volume, displaying a spike of 7.33%, significantly surpassing its typical daily average. As a result of this unexpected growth, financial analyst Kelly raised the status of Penn’s stock watch list from “neutral” to “buy.” Alongside this upgrade, Kelly also raised the price entry target for Penn stock, elevating it from $27 to $30.
ESPN and Penn Entertainment: A Perfect Match?
Efforts to associate ESPN’s brand with a sports betting platform have faced multiple unsuccessful attempts in the past. Despite ongoing interest from various entities, ESPN had consistently declined to engage in such partnerships, with reasons undisclosed to the public.
However, a notable shift occurred in August with ESPN’s surprising announcement of a partnership with Penn Entertainment, marking the inception of ESPN Bet.
Under this partnership, Penn Entertainment will pay ESPN $1.5 billion over a decade to acquire naming rights. Alongside this payment, ESPN will also receive $500 million in warrants, enabling the acquisition of approximately 31.8 million shares in Penn’s stock. These warrants will come with a 10-year vesting period.
Penn wasn’t initially ESPN’s top choice for collaboration, reportedly not even their second. However, Penn’s proposal, combined with ESPN’s drive to establish a strong foothold in sports betting, ultimately led to an obvious decision for the network.
In the brief period since its inception, the partnership between the two entities has shown promising progress and is anticipated to yield substantial benefits for both sides.
“We think ESPN Bet creates an asymmetric risk-reward, with 1) initial download and app activity much stronger than anticipated, 2) initial offers showing promotional discipline, and 3) stable Q3 earnings being better than expected for PENN’s core gaming business,” Kelley said.