- Per the agreement, Penn National will be Barstool Sports, a leading digital sports media company’s gaming partner. The company will launch Barstool Sportsbooks across the United Sates in the coming.
- Download Barstool Sportsbook & Casino and enjoy it on your iPhone, iPad, and iPod touch. Bet on sports with the Barstool Sportsbook from Penn National Gaming (NASDAQ: PENN) and Barstool Sports while enjoying the same online sports betting experience used.
- Location: SECOND FLOOR, NEAR SKYBOX SPORTS BAR Sports betting is here, and Hollywood Casino at Penn National Race Course is your 50-yard-line ticket to odds, point spreads and over/unders. Betting on sports has never been easier.
Penn National's Barstool Sportsbook to arrive at Detroit's Greektown Casino Hotel Guests will enjoy a wagering experience in close proximity to dining and numerous televisions showcasing sports action from across the country and around the world. Witches riches slot.
Penn National Gaming’s Barstool Sports brand seems to have shrugged off the devastating impacts of COVID-19 in 2020 and is upbeat heading into 2021. Despite a net loss of $669 million in 2020, there was no shortage of positive signs for Penn National or optimism from their management team about Barstool Sportsbook heading deeper into this year.
It was just over a year ago that Penn National purchased a 36% interest in Barstool Sports and married two Heavyweight brands in the sports industry. Since then, Barstool has become an important and successful entity in their existing states, Pennsylvania and Michigan with an eye on rapid expansion in the next 12 months.
Penn National Misses Estimates… but Not Because of Barstool
Penn National last weeks, came out with its financials for Quarter 4 and not-all-that-surprisingly, it missed estimates albeit slightly. Q4 total revenues came in at $1.03 billion, off of the $1.09 billion estimate before commencement of the quarter.
The main reason for Penn National’s struggle to hit estimates comes as no surprise either. COVID-19 forced closures of their Illinois, Michigan and Pennsylvania retail locations, which obviously affected the company’s bottom line. Penn revenues had been trending in the right direction ahead of the coronavirus shutdowns.
Along Comes Barstool
There wasn’t much doubt about the impact that a Barstool Sportsbook would have on the industry when the media brand crossed over into the legal betting space. Barstool boasts 66 million dedicated viewers as well as 52 million Instagram followers, over 26 million followers on TikTok almost 5 million on Facebook, and 27 million on Twitter nationally. Their reach is massive.
The first state in which they launched, Pennsylvania saw the sportsbook downloaded 72,000 times with approximately $300 million in bets with limited marketing. In their second market-launch, Barstool Sportsbook was downloaded by 48,000 new customers in Michigan and saw $27.5 million in betting handle in the first 10 days and reported net earnings of $12.7 million in Q4.
Singing the praises of their new brand, Penn National CEO Jay Snowden said in a statement: “We view Barstool Sports not only as a fantastic channel to promote our offerings, but also an undervalued media asset that has evolved from primarily a sports brand into a highly relevant sports and life-style brand,”.
Customer Acquisition Perks
The Barstool sportsbook was expected to benefit from the media brand’s 66 million dedicated monthly viewers. The betting brand’s attempts to flip a portion of those users, mostly younger, to online sportsbook customers has so far gone very well… and has done so cheaper than other participating sportsbooks.
The average customer acquisition cost for sportsbooks is said to range anywhere from $300 to $800. Barstool’s costs have bested those averages. In fact, Barstool’s costs are estimated to be just under $200 per customer.
In an investors’ call this week, Penn CEO Jay Snowden went on record saying: “For Penn, so far from the first four months in PA, despite all of the Barstool Fund matching that we’ve done as well as in Michigan in our first month, we are well below the bottom end of that range. We have so much room, we have so much cushion to be opportunistic and figure out what we want to do and how we want to do it.”
Where Do They Go From Here?
Penn expects the Barstool Sportsbook to be live in 10 states by the end of 2021. Indiana, New Jersey, Colorado, Virginia, West Virginia, Iowa and Tennessee are some of the states on the brand’s radar. The brand hopes to add a new jurisdiction every 3-5 weeks this year.
Illinois, one of the most exciting new markets in the US scene looks to be first in line to gain a Barstool Sportsbook. The Chicago-area market is Barstool Sports’ second-largest market in the country, giving the company an immediate leg-up before going live. The goal for Penn National is to have something in place in Illinois by March Madness, which is approaching quickly,
Maryland looks to be in Barstool’s immediate future as well. In mid-December, Penn National announced an agreement with Gaming and Leisure Properties to acquire Hollywood Casino Perryville with the plan to have the Barstool betting brand live some time this year.
Hopes Becoming Reality?
Barstool Sportsbook launched with an ideal to become a true Heavyweight in the US legal sports betting scene and those desires haven’t gone away. In fact, hope seems to be becoming reality for the brand.
Jay Snowden backed up his company’s desires last week when he said: “What I think you should assume is that we are going to be top three, we said that before we ever launched and we’re delivering on that. We’re going to be profitable faster than anyone else, and we’re delivering on that and continue to deliver on that pledge, again, faster than anybody else.”
“And as we scale, we just end up with a lot more dry powder to be more aggressive in the areas of widening that funnel and customer acquisition that we believe is driving the best return.”
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.
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.
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.
Penn National Sportsbook
As a result, while the Barstool Sportsbook may deliver on its massive promise, it is far from a sure bet.