Penn Entertainment‘s stock jumped 16.8% Thursday as the market reacted strongly to the company’s refreshed focus around interactive.
The segment should break even in adjusted EBITDA for 2026, CEO Jay Snowden said on Penn’s year-end earnings call. That comes as $150 million in fixed marketing costs for its deal with Disney for the ESPN Bet brand are gone after the two mutually agreed in November to end the 10-year agreement early.
That immediately led to positive interactive adjusted EBITDA for December and positive growth in key areas through January as Penn switched its focus to a business model focused on online casino.
PENN’s volume was more than three times its daily average.
Did Penn downgrade interactive outlook?
Analysts noted that Penn had previously said break even or better for its interactive guidance, but Snowden said break even is where the company is comfortable.
“Look, you have to pick a midpoint when you’re putting out a guide and so I think that just feels comfortable right now,” Snowden said. “… Overall, Super Bowl was good, the other sports in February have been OK so hold has been I’d say pretty close to where we anticipated through the first two months of the year on a combined basis. So, we built our budget from the bottom up, it told us that we felt comfortable putting break even out there and we’re delivering against that now.”
Snowden noted that Penn is in control of “all the levers” concerning interactive profitability, which he called a “great feeling.”
The company is now mainly focused on marketing in states with online casino. When asked about the sports betting marketing environment, Chief Technology Officer Aaron LaBerge made it clear Penn’s days of chasing the podium are over.
“We are not necessarily competing in that market anymore as, vis-à-vis, a FanDuel or a DraftKings. We don’t see ourselves in that realm,” LaBerge said.
Alberta not included
The guide does not include any new markets opening, including Alberta, which Snowden said should open midyear.
Penn is still finalizing its marketing plans for Alberta but expects to spend $15 million to $20 million around launch.
“It’s a really important market and we’ve all learned through the years that those initial signups you get, those are the most valuable customer cohorts that you end up with,” Snowden said. “So we gotta make sure we launch successfully in Alberta like we did in Ontario, and when you do you, tend to hold onto your market share much more effectively.”
Snowden noted that theScore’s sports media brand carries across Canada.
Penn interactive stats through January
Page 14 of Penn’s year-end investor presentation detailed some of the key changes since ditching the ESPN Bet brand on Dec. 1.
Online sports betting handle fell 24%, and that trend is expected to continue as Penn plans to let its lower-worth customers fall off. That helped sports betting net revenue more than double as hold improved 4.73 percentage points.
Average monthly active users grew 7% while average revenue per monthly active user climbed 54%.
The interactive segment reported a 290% increase in adjusted contribution profit, which is adjusted gross profit minus marketing costs. Interactive marketing costs fell 65% over those two months.
Sports predictions need Supreme Court judgment
The legal outlook for sports predictions is “clear as mud” according to Snowden, adding that it is “obvious” that these markets are sports betting.
“This really cannot get in front of the Supreme Court fast enough,” Snowden added. “… We’re just going to keep seeing this get delayed and delayed and delayed, and the businesses get bigger and broader.”
The current situation, where land-based operators are kept out of the market due to their gaming licenses in Nevada, puts those operators in an awkward position since others like DraftKings and FanDuel can operate in the predictions space, he noted.
As he noted during the third-quarter call, Snowden thinks “the best defense is offense” for the land-based operators. He has ideas that he has shared with his counterparts in those businesses and is having conversations with regulators and lawmakers to turn the situation into a win for both the operators and states.
