There’s been a self-fulfilling and nearly relentless optimism attached to Penn National Gaming‘s stock this year.
And while its leap into the Pennsylvania online sportsbook via the Barstool Sportsbook market turned in strong initial gaming revenue numbers, not all of the optimism appears rational when all of Penn’s numbers are examined.
Overall revenue remains way down for Penn
Penn National revenue for the quarter ending June 30, 2020, was $0.306 billion ($306 million), a 76.91% decline year-over-year, according to Macrotrends. For the 12 months ending June 30, 2020, revenue was $4.117 billion, a 9.52% decline year-over-year, according to the same source.
And yet the stock has largely prospered, buoyed by the promise of playing competitively with the market leaders in online sports betting in PA. But how exactly is Barstool Sportsbook stacking up in PA?
Barstool Sportsbook gets mixed results in September PA launch
In September, PA sportsbooks easily broke their own record from August, taking in nearly $462.8 million in total bets. Of that, the total online handle in the state was $414.1 million.
Barstool sportsbook’s handle was nearly $29.9 million for the abbreviated month of play in September (officially live for 13 days), or 7.2% of online market share. With a daily average handle of around $2.3 million, a projected full-month handle would equate to nearly $69 million.
That means its projected market share (based on September) is 15.2%.
That puts Barstool squarely in the running for third behind FanDuel (40.6%) and DraftKings (28.1%). BetRivers, PlaySugarHouse, Parx and Fox Bet all fell between 7.8% and 6%.
Barstool posts negative revenue in first month, high promo credits
What’s more difficult to project is revenue for the newest PA online sports betting app. Barstool revenue for its first 13 days came out to -$656,000. And that was before promotional credits, which tallied nearly $2.2 million, were subtracted.
So while Barstool is on pace for third in PA online market share, gross revenue of -$2.8 million is not exactly backing up the great start Penn and Barstool have been praising.
Promotional credits will likely tighten up over time, though. It’s normal for sportsbooks to go big on promos to attract new customers at launch. Plus, bettors clearly had a good month, as indicated by a paltry $1.1 million for total online sports wagering revenue. Overall revenue including retail sportsbooks was $6.3 million — also a subpar figure for the PA market.
Penn stock up due to Barstool app
The ride for $PENN stock began late last January. The Pennsylvania-based company bought a 36% share of Barstool Sports with the intention of going large into online sports betting, away from its roots as a regional brick-and-mortar casino operator.
The idea was to make up for lost time, big-footing into the sizzling online sportsbook market while pulling in the young male demographic of Stoolies, the nickname for a legion of devoted followers — 1.8 million on Twitter — of Dave Portnoy‘s Barstool brand.
And it worked, with shares up from around $26 at the start of the year to around $38 a share in February based on the promise and euphoria of the Barstool buy-in.
Then came the COVID-19 cliff, and then recovery
But then there was a drop off the cliff down to $3.75 a share as the virus shook up the gaming industry and the world economy in mid-March.
The stock recovered slowly, then steadily gained steam, eventually topping $76 as the Barstool online sportsbook launched in mid-September.
The Barstool app became the 10th online sportsbook app in the crowded and competitive PA market, the sole market where Penn chose to launch initially. Michigan is expected to be the next jurisdiction, with New Jersey and others waiting in line.
Many tout Penn stock, but only time will tell
And while the share price has dropped, trading just above $63 on Thursday’s close, many market watchers continue to tout the stock’s prospects.
Only a handful of outliers, notably Deutsche Bank on Oct. 1, said they saw a coming retreat in stock price for $PENN.
It will take some experience over time to see how the projections pan out.
And while it’s easy to see some promise in Barstool sports betting products based on market share potential in PA, the bottom line — and ultimately the value of the stock — will come down to actual revenue.
Luckily for Penn National, it has a number of revenue streams to draw from, including 41 gaming properties across 19 states. In Pennsylvania, Penn also has two iGaming products, DraftKings Casino and Hollywood online casino. Additionally, Penn plans to expand its online and retail sports betting footprint in the coming months.