Penn Stock Upgraded Following ESPN Bet Departure

• Analyst says ESPN Bet was an “overhang” on Penn stock
• New price target implies upside of almost 50%
• He says under-performance following the news is surprising

Shares of Penn Entertainment (NASDAQ: PENN) are again pointed lower Friday — a day after the gaming company announced the end of its ESPN Bet agreement — but at least one analyst believes the regional casino stock is poised for upside.

In a note to clients, Stifel analyst Jeffrey Stantial upgraded shares of the Ameristar operator to “buy” from “hold” from boosting his price target to $21 from $19, implying upside of nearly 50% from current levels. He says Penn’s decision to end the ESPN partnership removes an “overhang” from the stock. The gaming company made the announcement on Thursday, well advance of the August 2026 timeline many expected.

We see room for shares to grind steadily into the $20s with an attractive near-term catalyst path still left: 1) annualization of new competitive casino openings & resulting brick-and-mortar inflection, 2) proof points of attractive return on project spend, 3) steady iCasino share ramp potentially accelerated by re-allocated financial/operational resources, and 4) Interactive asset monetization optionality,” wrote the analyst.

Penn is paying ESPN $43.1 million in the current quarter related to the end of the relationship with the former expected to incur about $14 million in noncash expenses related to equity warrants granted to Walt Disney (NYSE: DIS) as part of the original deal.

Penn Stock Could Be Rewarded with ESPN Bet Gone

Penn isn’t leaving the online sports betting (OSB) altogether. Rather, its platform will move to theScore brand, but it’s expected that will serve as a funnel to potentially convert customers to the operator’s Hollywood Casino iGaming app, which is making strides.

“Despite improving brick-and-mortar and iCasino fundamentals, shares are -26% year-to-date (vs. peers -8% on average), now just +2.5% off trailing five-year lows, which we attribute primarily to overhang from ESPN Bet and fears of further loss-making beyond the late-26 opt-out option,” notes Stantial. “With this key overhang now removed, we think investors can more cleanly own PENN into the forthcoming, incrementally de-risked, free cash flow (FCF) inflection which we view as excessively discounted at current levels (21% FY27 FCF).”

He also reiterated the view that it’s possible Penn will look to monetize theScore’s Canadian business for which it paid $2 billion in cash and stock four years ago. The analyst described the Canadian operations as “noncore” under Penn’s iGaming-first interactive strategy.

Albatross Removed from Penn Stock

Over the past several years, Penn sunk billions of dollars into OSB efforts with almost nothing to show for it. Even with the benefit of ESPN branding, the company never mounted a credible market share threat to entrenched incumbents in the industry.

Penn’s splashy though ill-fated moves prompted investors to look at the stock as a sports wagering name, diverting attention away the company’s regional casino business, which is solid. That includes encouraging results in Joliet, Ill. where the operator recently enhanced its casino hotel.

“We see PENN as comparatively well-positioned given geographic diversification, well-documented operating prowess, and relatively higher quality assets enabling PENN to compete primarily on product,” concludes Statnial. “We also see an attractive pipeline of growth projects in Retail, with proof points of return on Joliet potentially improving sentiment on the broader pipeline.”