Penn Entertainment (NASDAQ:PENN), the gaming company previously known as Penn National Gaming, will exercise its rights to buy 100% of Barstool Sports, the sports blogging company. PENN stock was virtually unchanged on the news, trading at about $36 per share.
Penn had bought 36% of Barstool in early 2020 for $163 million. It has since used the name for its digital sportsbook. It stood by founder Dave Portnoy when he faced allegations of sexual abuse early this year. Portnoy has denied the accusations.
The company has a market cap of $5.6 billion. The company earned $26.1 million, or 15 cents per share, on revenue of $1.63 billion in its most recent quarter.
Content Is King
Penn is in a marketing battle for online gamblers against well-capitalized competitors like Caesar’s Entertainment (NASDAQ:CZR), Flutter Entertainment (OTCMKTS:PDYPY) and DraftKings (NASDAQ:DKNG). Content is a key battleground.
The hope is that Barstool’s edgy blog posts and Portnoy’s personality can draw young gamers to its brands for less than the cost of national advertising. Customer acquisition costs have helped bring down all the big online gaming stocks this year. PENN stock is down 30% so far in 2022.
Caesar’s and DraftKings have partnered with Walt Disney’s (NYSE:DIS) ESPN for their sportsbooks. Flutter, based in England, owns Fanduel, DraftKing’s main competitor in fantasy sports. Sinclair Broadcasting (NASDAQ:SBGI) got into the game after buying Fox Sports regional networks and doing a naming deal with Bally’s (NASDAQ:BALY). FuboTV (NASDAQ:FUBO), a streaming service built around sports, is looking for partners to run its sportsbook.
Penn casinos operate under 12 brands, including Ameristar, Boomtown and Hollywood Casino. In addition to Barstool, the company does mobile betting as TheScore.
What Happens Next for PENN Stock?
Online sports betting, which seemed like a sure thing after the Supreme Court ruled in favor of allowing states to legalize the practice in 2018, is proving a tough market. Each state has its own regulations, many states still haven’t legalized it and customer acquisition costs forced even Caesar’s to back off from a TV ad campaign.
What’s most likely now is a shakeout, resulting in a market with room for fewer players. PENN stock might be one of the players shaken out, which would be a win for its investors.
On the date of publication, Dana Blankenhorn held a long position in FUBO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.