Penn Entertainment will not be among the sportsbook operators spending heavily on promotions this football season, a strategy Wall Street largely endorsed following the company’s second-quarter earnings.
Penn lowered its interactive revenue outlook last week as sportsbook volume came in weaker than expected, but maintained its forecast for a $20 million adjusted EBITDA loss due to the Alberta online casino market launch. The company plans to offset slower growth through tighter marketing, operating cost reductions and a greater emphasis on higher-margin online casino.
That approach stands out as FanDuel and DraftKings ramp promotional spending and prediction market investment, while Kalshi and Polymarket enter their first full football season.
PENN shares initially ticked up following earnings but have since fallen below pre-earnings levels.
Penn prioritizes profit amid uncertainty
Citizens analyst Jordan Bender said he was encouraged by Penn’s focus on profitably rather than “chasing customers during an uncertain period for the online sports betting market.”
Bender said the strategy reflects a widening divide in online gambling, with larger operators investing aggressively in sports betting while others prioritize more profitable online casino growth. Penn’s broader investment case remains intact as long as digital demonstrates a path toward sustainable EBITDA growth while its retail casinos continue growing earnings, he added.
Bender maintained his market outperform rating and $26 price target.
Macquarie analyst Chad Beynon similarly said he believes Interactive is becoming more manageable financially as Penn exercises tighter marketing and operating discipline. He raised his price target to $25 from $23 and maintained an outperform rating.
Penn lowers sportsbook expecations
That discipline also comes with lower expectations for Penn’s sportsbook business.
Deutsche Bank analyst Steven Pizzella estimated Penn cut its interactive revenue outlook by $40 million primarily because it expects less betting volume.
The second quarter saw Penn’s online sports betting revenue fall 22% year over year as customer-friendly NBA Finals and World Cup outcomes weighed on Interactive EBITDA. Penn, however was able to limit its $9.5 million loss to slightly better than what Wall Street expected. Pizzella estimated it would have been closer to $6.5 million under normalized sports outcomes.
Pizzella raised his Penn price target to $23 from $18 but maintained his hold rating.
Digital discipline aids win rate
Despite weaker hold during the quarter, Penn generated a better year-over-year net win rate as it spent more selectively on promotions, which Truist analyst Barry Jonas pointed to as evidence of continued promotional discipline improving Penn’s sportsbook economics.
Jonas maintained his buy rating and $25 price target.
Stifel analyst Jeffrey Stantial believes the rising costs of competition combined with softer industry-wide volumes may have some investors down on Penn’s ability to accelerate revenue. He argued that those concerns however, underestimate Penn’s increasingly iCasino- and Canada-led strategy, along with additional opportunities to reduce marketing and fixed costs.
Stantial maintained his buy rating and $25 price target.
