Penn Value Outcomes Include Killing ESPN Bet, Selling theScore, Says Analyst

• More talk of ESPN Bet’s potential death
• theScore could also be sold

With the stock down 13% year to date, Penn Entertainment (NASDAQ: PENN) badly needs a jolt and avenues for restoring investor confidence. Those could come in the form of divestments and killing the sagging ESPN Bet mobile sportsbook.

In a note to clients out late Monday, Stifel analyst Jeffrey Stantial said “the most value-accretive outcome” for Penn entails terminating the ESPN Bet agreement with Walt Disney (NYSE: DIS), selling theScore, and “improved disclosures for market access royalties.”

Should Penn proceed with the aforementioned actions, there’s a path to $23 a share, observed Stantial. That’s well ahead of the stock’s Monday closing price of $17.26. The shares are off 23.08% over the past month.

Penn Likely to Remain Volatile Over the Near Tern

Stantial acknowledged that there’s unlikely to be any clarity on ESPN Bet’s future until the middle of next year, so it’s possible the stock remains turbulent over the near term.

Perhaps the largest near-term potential catalyst could be Penn’s June shareholder meeting, but that being a positive result for the shares could largely hinge on the ability of investor HG Vora to win a proxy fight against the company and procure director seats. On January 31, that hedge fund nominated three candidates to the Penn board, all three of whom have gaming industry experience and two of whom have previous ties to Penn.

Improved governance following the June shareholder meeting may also help stabilize sentiment, though investors will likely want a better sense of potential changes in strategy before starting to re-visit the name,” noted Stantial.

As for selling theScore, for which Penn paid $2 billion in August 2021 to gain a footprint in Canada, such a transaction hasn’t been mentioned publicly by the company. At the NEXT Summit New York last week, theScore founder John Levy, who left Penn in February 2024, implied the casino company made some missteps in sports betting.

“They run good casinos,” Levy said. “But it’s a leap to think that just because you have that [casinos], you’re going to make sports betting work.”

Some Penn Positives

A pivot to iGaming sans sports betting and prompting investors to remember that its core regional casino business is a long-term strength could be among the ways Penn restores confidence among shareholders.

We continue to see PENN as best-in-class regional brick & mortar operators, with well-proven operating prowess likely translating to a more resilient top-line & margin outlook vs. peers amidst continued softness in the low-income consumer & sticky labor cost pressures,” adds Stantial. “We also favor PENN’s geographic diversity and predominately drive-to assets in the current macro environment, while comparatively high blended gaming tax rate limits operating leverage should the consumer deteriorate further.”

He rates the stock “hold” with a $19 price target.