After nearly crapping out, Penn National Gaming appears to be back on a streak.
View Penn National Gaming, Inc. PENN investment & stock information. Get the latest Penn National Gaming, Inc. PENN detailed stock quotes, stock data, Real-Time ECN, charts, stats and more. The company launched Barstool Sportsbook, a mobile application for sports betting, in Pennsylvania on September 18, 2020. During its first week of operation, it handled $11 million in wagers. Only those physically located in Pennsylvania may legally use the app, however, Penn National intends to expand its operations to other states.
- 2 days ago Now, Penn National plans to develop an online sports betting app, iCasino, as well. Barstool will play a role in getting traffic to both the casinos and betting platform.
- Penn National Gaming, Inc. Has strategic agreement with Choice Hotels International, Inc. The company was formerly known as PNRC Corp. And changed its name to Penn National Gaming, Inc. Penn National Gaming, Inc. Was founded in 1972 and is based in Wyomissing, Pennsylvania.
Its partnership with Dave Portnoy‘s Barstool Sports at least in part fueled Penn stock's rise, fall and resurrection from January to June.
Penn National wanted to go big
The roller coaster ride came about because Penn, a top regional gaming company headquartered in the heartland of Pennsylvania just north of Harrisburg — think small-town suburbia set among farm fields and forested small mountains — had bigger aspirations at the start of the year.
What had begun as a family horse racing business wanted to go really big.
Having made itself a presence in nearly every legal US gambling market, with 41 properties and 26,000 employees, Penn was bumping up against economic concentration regulations.
Penn wanted Barstool as an online sports brand
That meant the only way for it to really grow was to tap a new market, a market free of the geographic constraints that came with buying or building yet another property.
The booming online sports betting market — which Penn had only tapped through brick-and-mortar under a past executive team — was its ticket to the gaming stratosphere.
On Casino on packard ave. Jan. 29, Penn National rolled the dice and bought a 36% share of the sports-centric, risque and sometimes raunchy blog and podcast business Barstool Sports.
The purchase was for approximately $135 million in cash and $28 million in shares of non-voting convertible preferred stock. Penn swiftly closed the deal after the announcement.
Additionally, Penn National agreed to increase its ownership of Barstool to approximately 50% through an incremental investment of approximately $62 million at the end of three years.
Barstool brings a new demographic to Penn
Jay Snowden, president and CEO of Penn National, spelled out the rationale of buying a company without an internet gambling platform on the company's website:
'This exciting new partnership with Barstool Sports reflects our strategy to continue evolving from the nation's largest regional gaming operator, with 41 properties in 19 states, to a best-in-class omnichannel provider of retail and online gaming and sports betting entertainment.
'With its leading digital content, well-known brand and deep roots in sports betting, Barstool Sports is the ideal partner for Penn National and will enable us to attract a new, younger demographic, which will nicely complement our existing customer database.
'In addition, with 66 million monthly unique visitors, we believe the significant reach of Barstool Sports and loyalty of its audience will lead to meaningful reductions in customer acquisition and promotional costs for our sports betting and online products, significantly enhancing profitability and driving value for our shareholders.'
Coronavirus disrupts the plan — and Penn's stock value
And on paper, the plan worked at first.
The stock, which had hovered in the $25 to $26 range at the start of the year, hit $38.28 a share on Feb. 13.
Then came COVID-19 and an existential crisis for Penn stock, which bottomed at $4.52 on March 18.
Casinos shut down. Horse tracks shut down. Penn furloughed most employees. Two PA expansion projects, mini-casinos, stopped construction. Assets were sold. A huge stock offering followed to raise cash.
Penn casino reopenings coincide with rising stock price
But now properties are reopening. Employees are returning. But at least at least 1,900 Penn jobs at casinos are gone for good as the company pivots toward online wagering. Resuming work on the mini-casinos in Yorkand Morgantown still awaits, though.
Meanwhile, Penn is rebranding its retail books to carry the Barstool name. Its mothership casino in PA, Hollywood Casino at Penn National Race Course, is back up and running, and the company is working to create an online presence based on the Barstool brand.
In fact, despite recently announced permanent layoffs, the company is on a hiring tear.
On Monday, CNBC's Jim Cramer remotely hosted Snowden of Penn, along with Portnoy and Barstool CEO Erika Nardini, on his program The Street.
And while Cramer briefly discussed Penn stock's up, down and up record so far this year, he only spoke of Barstool and the coronavirus shutdown when laying out the context.
Penn plans August launch of Barstool online betting app
Snowden told Cramer that Penn had 70% of its propertiesoperating at 50% capacity and had called back 11,000 employees. No mention was made of the permanent job losses. Bet genuine prediction football.
Snowden also told Cramer that the Barstool online book should launch in August. The target would put Penn ahead of the anticipated NFL start.
Nardini spoke of Barstool's growth across platforms and the devoted audience it delivers.
Davey Day Trader moves the market again
Portnoy, uncharacteristically wearing a suit (brokers referred to as 'suits' are frequent targets of his diatribes), predicted that Barstool will be the 'dominant player' once sports return.
He boasted later that night on Twitter to his 1.5 million followers:
'I just sold the shit out of myself in Penn National.'
By the next day, Penn's stock was up more than 17% at midday. Penn closed up about $5 a share, or just under 13%, at $36.82. Several market stories took note.
Two days later, the price has mostly played in the $33 range.
Since his highly publicized shift to 'Davey Day Trader Global,' Portnoy has demonstrated an ability to influence stock prices, presumably through his 'stoolies' who have followed him into the market. His latest national appearance is yet another example of the 'Barstool effect' at work, some say.
Penn National's imminent expansion into online sports wagering and the long-term stability of the stock price should provide a more accurate picture of the company's position in the months to come.
Penn National is America's new hottest gaming stock. The company is up some 1,200% from its pandemic lows to around $53 at the time of writing.
And just like DraftKings earlier this year, analysts keep raising their price targets higher and higher as the stock climbs.
Goldman Sachs became Penn's latest supporter last week, initiating the stock as a ‘buy' with a $60 price target.
'Penn sits at the cross-section of a rapidly rebounding regional casino space and inflecting growth in sports betting,' Goldman analyst StephenGrambling wrote.
Breaking down Barstool Sportsbook economics
Grambling argued Barstool Sportsbook's customer base and content creation engine would drive 'one of the lowest customer acquisition costs in the industry,' allowing Penn to quickly take sports betting share.
Barstool Sports Penn National
Snowden told Cramer that Penn had 70% of its propertiesoperating at 50% capacity and had called back 11,000 employees. No mention was made of the permanent job losses. Bet genuine prediction football.
Snowden also told Cramer that the Barstool online book should launch in August. The target would put Penn ahead of the anticipated NFL start.
Nardini spoke of Barstool's growth across platforms and the devoted audience it delivers.
Davey Day Trader moves the market again
Portnoy, uncharacteristically wearing a suit (brokers referred to as 'suits' are frequent targets of his diatribes), predicted that Barstool will be the 'dominant player' once sports return.
He boasted later that night on Twitter to his 1.5 million followers:
'I just sold the shit out of myself in Penn National.'
By the next day, Penn's stock was up more than 17% at midday. Penn closed up about $5 a share, or just under 13%, at $36.82. Several market stories took note.
Two days later, the price has mostly played in the $33 range.
Since his highly publicized shift to 'Davey Day Trader Global,' Portnoy has demonstrated an ability to influence stock prices, presumably through his 'stoolies' who have followed him into the market. His latest national appearance is yet another example of the 'Barstool effect' at work, some say.
Penn National's imminent expansion into online sports wagering and the long-term stability of the stock price should provide a more accurate picture of the company's position in the months to come.
Penn National is America's new hottest gaming stock. The company is up some 1,200% from its pandemic lows to around $53 at the time of writing.
And just like DraftKings earlier this year, analysts keep raising their price targets higher and higher as the stock climbs.
Goldman Sachs became Penn's latest supporter last week, initiating the stock as a ‘buy' with a $60 price target.
'Penn sits at the cross-section of a rapidly rebounding regional casino space and inflecting growth in sports betting,' Goldman analyst StephenGrambling wrote.
Breaking down Barstool Sportsbook economics
Grambling argued Barstool Sportsbook's customer base and content creation engine would drive 'one of the lowest customer acquisition costs in the industry,' allowing Penn to quickly take sports betting share.
Barstool Sports Penn National
Goldman estimated the upcoming Barstool Sportsbook app could acquire customers at $57 compared to $193 for DraftKings and $190 for FanDuel. For further context, BetMGM said last week it hoped to reach a blended $250 CPA.
Goldman also pointed to Barstool's social media reach, saying the two factors pointed towards a 15% market share for the Barstool Sportsbook.
'Based on our DKNG valuation, that methodology would drive a $4.5 billion valuation for Barstool/Penn sports betting alone,' Grambling said.
That's $4.5 billion out of a current Penn market cap of $7 billion. In other words, a huge amount of Penn's current market value is already driven by the Barstool Sportsbook.
As RoundhillInvestments CEO WillHershey put it recently:
'This is not hyperbole — the Penn Barstool acquisition may be one of the best deals of all time. I wonder what position the company would be in had it not gotten done.'
Questions to be answered for Penn National
If that $4.5 billion valuation stems from massive sports betting growth on strong margins, is it realistic?
Here's more from Goldman:
'From the company's 66 million monthly unique visitors, 62% bet on sports with 44% of those betting at least 1x per week. Additionally, 65% of their audience is in the key 21-44 age group. The cross-section implies a potential database of users that actively bet on sports of 18 million. Even if only 10% of these users are converted to the Penn/Barstool app, [that's 1.8 million users.]'
Penn National, of course, already paid $163 million for access to that customer database by buying its Barstool stake. So ignoring that cost in new CPAs seems a little disingenuous.
But perhaps more importantly, there's an assumption of 1.8 million sign-ups for a product the world has not seen yet.
And the app is on track to launch in September instead of August as initially planned, perhaps a tiny warning sign.
'What's more important?' Penn CEO JaySnowden said at the firm's recent Q2 results. 'Rushing it and getting to some MLB and NBA games in August? Or doing this right, launching it in September when we know it will deliver a great experience for the end user?'
Execution is key
Getting it right is, of course, more important than rushing it. But it's also a risk to debut your first-ever sports betting app into the furnace of NFL betting.
Do you want any bugs exposed on those sleepy days in August, or on NFL Sunday when 50,000 Philly fans log on at 1 pm EST to back the Eagles?
The product really is key here, and, of course, it's an unknown. But there is likely a low bar to clear. We know the Kambi back-end should work – DraftKings and BetRivers have built good market share on the back of it.
Combine that with the Barstool marketing machine, and the Penn front-end really just has to be good enough.
Why that's the case
As Eilers & Krejcik analyst AlunBowden put it in a recent note: 'Barstool is a different beast. There is no doubting the willingness or desire of the team to throw themselves at gambling promotion.'
He added, however: 'Barstool will have to excel at the fundamentals to make this work in product, retention, customer service, and trading. And that is not as easy as it looks.'
It's not, and it's an area Penn may struggle, simply because it's new to the space and sports betting is operationally complex. But it's worth remembering it took Sky Bet in the UK nearly a decade to back up its media presence with a great product. And when it did, it exploded.
Barstool has a clear route to a similar level of success. The road just might be bumpier than some analysts are expecting.
Buy or sell Penn National stock?
As for the Penn valuation, a word of warning: earlier this year when $DKNG was soaring, one reason was its exclusivity.
It was essentially the only way for US investors to get access to the US online sports betting industry.
Barstool And Penn
That is changing rapidly. Companies like MGMand CZRare now pushing their sports betting operations to investors. Companies like GAN, Rush Street Interactive, and Sportradar can (or could) also offer some exposure to the sector. Or investors can just pick an entire bundle of sports betting stocks via the $BETZ ETF.
Either way, if price is a function of supply and demand, a growing glut of supply can't be good for any individual stock's price.
As a result, while the Barstool Sportsbook may deliver on its massive promise, it is far from a sure bet.
