GAMB - PENN jumps 15% with ESPN deal viewed favorably DraftKings sheds 8%

2023-08-09 11:00:27 ET

PENN Entertainment ( NASDAQ: PENN ) rose in morning trading on Wednesday after investors took in the Q2 earnings topper and the news from Tuesday that the company would partner with ESPN on sports betting.

During the earnings call, PENN ( PENN ) said the decision was based on a need to scale to compete for higher market share in sports betting. The company will spend $150M a year in ESPN ads and see promotional spending increase in Q4 when the ESPN BET app launches. Notably, PENN will also have a standalone Hollywood Casino app for iGaming.

On Wall Street, Needham thinks PENN is in a better position to compete than it did with the Barstool property, which had been bleeding market share. Barclays thinks the divestiture of Barstool could remove a key overhang on the stock. Meanwhile, Roth MKM sees the value accretion potential for PENN from the deal of as high as $15 to $90 per share assuming a 15x long-term EBITDA multiple. Roth analyst Edward Engel also sees the increased competition as a negative for DraftKings ( DKNG ), although the deal has positive implications for Gambling.com ( GAMB ) with industry competition heating up. Morgan Stanley said key questions to be mulled over are the impact on promotional activity across the sector after EPSN Bet rolls out and if PENN has the tech issues with theSCORE ironed out enough to keep consumers satisfied with the new product.

PENN ( PENN ) was up 15.52% at 10:59 a.m. on Wednesday, while DraftKings ( DKNG ) fell 8.12% to cut into the big year-to-date rally.

More on sports betting stocks:

• Sports betting shakeup: ESPN bets big with PENN in deal aimed at clipping DraftKings' and FanDuel's dominance
• Sports betting rush: DraftKings and peers rally amid profitability focus and NFL season buzz
• DraftKings soars after posting profitable quarter and guiding for positive EBITDA in 2024

For further details see: