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Investors Business Daily
Business
ED CARSON

ESPN-Penn Sportsbook Deal: PENN Stock Soars, DraftKings Tumbles

Disney-owned ESPN will team up with Penn Entertainment on a gambling sportsbook, the companies announced Tuesday evening. PENN stock soared Wednesday on the ESPN-Penn team-up, but slashed early gains. DraftKings fell sharply.

ESPN-Penn Sportsbook Deal

Penn Entertainment will rebrand its Barstool Sportsbook as ESPN Bet, launching this fall in the 16 legalized-betting states where Penn is licensed. ESPN, which has been looking for a sports-betting partner, will use ESPN Bet exclusively.

Penn will pay ESPN $1.5 billion cash over 10 years, plus $500 million in warrants to buy PENN stock. In return, it will get exclusive rights to the ESPN Bet trademark in the U.S. for the next 10 years.

Meanwhile, Penn Entertainment is parting ways with Barstool Sports, divesting all of its stake to Barstool founder David Portnoy.

Analysts Aren't All-In On ESPN Bet

Analysts aren't betting against ESPN and Penn Entertainment, but aren't all in either.

Previous ESPN marketing deals with Caesars Entertainment and DraftKings had mixed results, Wells Fargo analyst Daniel Polizer noted. Other big media-gaming alliances haven't been huge either.

Gaining market share from DraftKings and FanDuel will be difficult, Bank of America analyst Shaun Kelly noted. Kelly said the deal will likely be a drag on Penn earnings for 1-2 years.

PENN Stock Soars

PENN stock jumped 8.7% to 27 on Wednesday, gapping above long-sliding 50-day line. But shares came well off intraday highs of 29.38, just  below the 200-day line. Shares fell 0.7% to 24.84 on Tuesday, not far from a two-year low set in June.

DKNG Stock Tumbles

DraftKings stock sold off 10.9% Wednesday, approaching its 50-day line. DKNG stock is still up 148% so far in 2023. DraftKings is a major holding for Cathie Wood's ARK Invest ETFs.

MGM Resorts dipped 0.5%, but in a buy zone after bouncing from a pullback to the 50-day following earnings. MGM has a major sportsbook operation.

CZR stock fell 1.9%, reversing lower after initially retaking a buy point.

DIS stock sank 0.7%. Walt Disney reports fiscal Q3 earnings late Wednesday.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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