Concerns over Penn Entertainment’s partnership with ESPN Bet and the larger macroeconomic picture have led to a lower price target from Stifel.
Stifel cut the target for PENN to $19 per share, down from $22, while maintaining its hold rating in a March 17 report.
The change comes as Penn faces mounting investor pressure over its online sports betting strategy. Hedge fund HG Vora, which owns a significant stake in the company, launched a proxy battle in February, after nearly $4 billion in losses tied to its interactive segment.
The report also examined Penn’s long-term options, including a potential exit from its ESPN Bet partnership in 2026, which CEO Jay Snowden addressed publicly for the first time in February.
Potential paths forward for Penn Entertainment
Since Penn’s year-end earnings report in February, investor discussions have largely focused on whether the company will continue its partnership with ESPN Bet, which has struggled to gain traction in the US market. Stifel analysts outlined three potential paths forward:
- Exiting ESPN Bet and shifting to iCasino: Stifel sees this as the most beneficial scenario, allowing Penn Entertainment to focus on the more profitable online casino market. According to the report, this could also mean selling theScore, its Canadian sportsbook and media asset, and providing better disclosure of market access royalty revenues.
- Keeping the ESPN Bet partnership: Stifel notes this would require ESPN Bet to significantly improve its market share, which currently sits at around 3% in active states. The firm remains skeptical that Penn can reach the double-digit handle share needed to make the partnership financially viable.
- Selling its retail or digital business: While not a primary expectation, Stifel acknowledged the possibility of Penn exploring asset sales. Last year, Boyd Gaming was rumored to have interest in acquiring the company, though no deal materialized.
Broader market challenges a concern
Stifel’s revised price target also reflects broader economic pressures on Penn and other regional casino operators. The firm highlighted that regional gaming stocks tend to be sensitive to consumer sentiment, which remains uncertain.
While Penn’s physical casino business remains stable, its digital division — including ESPN Bet, Hollywood Casino, and theScore — has yet to turn a profit.
Penn aims to break even in its interactive segment by 2025, targeting a $350 million improvement in EBITDA for the year. However, investors remain cautious as the company continues to post losses and faces uncertainty over the ESPN partnership.
TheScore has performed significantly better in Ontario compared to ESPN Bet in the US. The company reported that monthly active users in the province were up 16% for sports betting and 43% for iGaming in the fourth quarter, with adjusted gross profit up 36% year over year.
John Levy, whose family sold the company to Penn for $2 billion in 2021, stepped down last year and has since criticized Penn’s handling of its several brands, describing the relationship as “tumultuous.”
Penn plans to keep growing ESPN Bet
Snowden has defended Penn’s approach, emphasizing improvements to ESPN Bet’s product and deeper integrations with ESPN’s media ecosystem.
The app recently launched live streaming in select markets and is integrating with ESPN’s NCAA Tournament Challenge for March Madness. Chief Technology Officer Aaron LaBerge, formerly of ESPN and Disney, has also pointed to account linking between ESPN Bet and ESPN’s core app as a way to drive engagement, with plans to introduce personalized betting experiences throughout the year.
While Penn continues to plan more and more ways to grow ESPN Bet, Stifel’s report suggests that investors are growing skeptical of the company turning the brand around before the 2026 opt-out clause becomes a more pressing decision point.
