PENN Entertainment Receives Upgrade Amid Strong Prospects for ESPN Bet

Jonas has set a price target of $23 for PENN, highlighting the underestimated potential of ESPN Bet in PENN’s overall valuation.

Underappreciated Value of ESPN Bet

Despite the operational kickoff of ESPN Bet in November 2023, Jonas points out that the market has yet to fully recognize its value within PENN’s portfolio.

This oversight presents a favorable risk/reward scenario for investors, as the current stock price reflects little to no value for this venture.

The analyst’s optimism is further bolstered by the anticipation of stronger-than-expected performance in the upcoming first-quarter results, due on May 2.

Broadening the Interactive Landscape

Beyond ESPN Bet, PENN’s Interactive segment encompasses several other profitable enterprises. Jonas stresses that even if ESPN Bet does not meet expectations, other aspects of PENN Interactive retain intrinsic value that could support the company’s financial health.

This includes potential recurring skin fees from other sportsbooks, thanks to PENN’s extensive licensing through its land-based casinos, which could generate between $50 million to $70 million annually.

The company’s iGaming business also seems to be a viable profit generator, albeit on a smaller scale, benefiting from a distinct cost structure.

With ESPN Bet currently ranking as a top-four player in terms of cash handle share since its launch, trailing only behind giants like FanDuel, DraftKings, and BetMGM, and ahead of competitors such as Caesars Sportsbook, the future looks promising for PENN’s interactive endeavors.