Bet On It: Levy family to step down from roles at Penn Interactive

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space.

SECTOR NEWS: Penn Entertainment (PENN) announced that the founding family behind theScore — John Levy, Benjie Levy, Aubrey Levy and Noah Levy – will be stepping down from their roles at Penn Interactive, with John departing in mid-February and with Benjie, Aubrey and Noah departing in April. In conjunction with this planned leadership transition, the company is in the final stages of its search for a new head of interactive. “This transition plan comes at a natural inflection point, with the migration to our proprietary technology platform complete, theScore’s media and betting business delivering record results, and ESPN BET off to a strong start,” said Jay Snowden, CEO and president of Penn Entertainment. “The Levys are a family of successful entrepreneurs and are truly pioneers in the sports media and gaming industry. I am very proud of what we’ve been able to accomplish with them, including the development of an extremely deep and talented bench at PENN Interactive. With this experienced, best-in-class team firmly in place, we are well prepared for this to be a seamless transition and to continue growing our position as a leader in online gaming and sports media,” said Mr. Snowden. Penn acquired Score Media and Gaming in October 2021 and integrated theScore with its Penn Interactive unit under the leadership of Benjie Levy as Head of Interactive with John Levy assuming the role of executive chairman of theScore. BofA noted that while “disappointing at face,” turnarounds are never a straight line and the firm thinks investor expectations for Penn and ESPN Bet remain low. The firm, which thinks theScore team has navigated multiple major transitions for Penn and that they leave Penn in “good shape” as they start to ramp a more marketing/retention driven strategy following ESPN Bet’s 17 state rollout in November, reiterated a Buy rating and $30 price target on Penn shares.

Macau’s gaming bureau reported January gross revenue from games of fortune in the region was up 67.0% year-over-year to 19.337B patacas.

Nevada reported December statewide gaming win up 9.04% to $1.43B. In December, the revenue generated on the Vegas Strip reached an all-time high of $905M, showing an 11% increase compared to the same period last year. This growth was attributed to strong performances in both table games and slot machines. Macquarie told investors in a research note that Baccarat volumes reached nearly $1B, marking an 18% year-over-year increase, and favorable hold contributed to a 50% growth in Baccarat revenues. Overall, revenues from table games saw a 12% increase. Slot machine revenues also experienced a 10% year-over-year growth, driven by a record-breaking $6.2B in slot handle, which increased by 8.9% compared to the previous year. This performance resulted in a 11% year-over-year growth and a 9% quarter-over-quarter growth in gross gaming revenue, or GGR, for the fourth quarter. In 2023, the Vegas Strip’s GGR totaled $8.9B, reflecting a 7% year-over-year increase, with table and slot revenues growing by 11% and 5%, respectively. Additionally, December’s Strip Revenue per Available Room showed a 7% year-over-year increase, contributing to a 19% year-over-year growth for the fourth quarter, boosted by the Formula 1 race held in November.

Caesars Entertainment (CZR) announced an expansion of its relationship with the Eastern Band of Cherokee Indians to bring the company’s sports wagering platform online in the Tar Heel State for the launch of legalized mobile sports wagering. “The agreement furthers the partnership, granting Caesars Sportsbook with mobile sports betting market access via a license held by the Eastern Band of Cherokee Indians Tribal Casino Gaming Enterprise, subject to all required regulatory approvals. Caesars Sportsbook intends to go live with mobile sports wagering when North Carolina launches online sports betting on March 11, 2024. Ahead of the official launch, the Caesars Sportsbook mobile app will begin accepting sign-ups and deposits starting on March 1,” Caesars stated.

EARNINGS PREVIEW: Northland’s data indicated that while DraftKings’ (DKNG) sportsbook hold in October was in line with expectations, there was a significant decrease in hold during November due to sports outcomes favoring customers. Although December witnessed a recovery with more favorable hold, the firm believes it won’t fully compensate for the impact of November’s outcomes, primarily influenced by numerous NFL favorites winning and potentially increasing cash parlay payouts for bettors. Flutter’s (FLUT) recent trading update also supported this trend of unfavorable sports results. It’s important to remember that the nature of the sportsbook business entails periods of both favorable and unfavorable outcomes based on sports results, resulting in variability within shorter time frames. The company’s structural sportsbook hold, approximately 9.5%, is expected to balance out more evenly in the long term, as we’ve observed periods where sports outcomes are more favorable for DraftKings as well.

Challenges in high-frequency data points have increased the difficulty in having strong confidence across the Gaming & Lodging sector. Nevertheless, we identify certain areas experiencing consistent growth trends. Notably, several entities within our coverage have demonstrated market outperformance during the period of 2017-2019, despite the overall sub-sector’s top-line growth lagging behind GDP/PCE. Consequently, we continue to maintain a selective stance, with a focus on these specific areas. In Macau, our preference lies with LVS (LVS) and DraftKings with anticipated 4% upside in online ports betting, or OSB.

ANALYST COMMENTARY: Morgan Stanley upped the firm’s price target on Wynn Resorts (WYNN) to $99 from $98 and reiterated an Equal Weight rating on the shares. The firm also raised the firm’s price target on MGM Resorts (MGM) to $43 from $42 and kept an Equal Weight rating. Lastly, Morgan Stanley raised the firm’s price target on Boyd Gaming (BYD) to $67 from $66 and backed an Equal Weight rating on the shares. The changes are in conjunction with the firm’s Q4 preview for the gaming group, citing a slight Vegas estimate increase. After mixed performance last year, most gaming stocks have underperformed year-to-date as domestic data outside of Las Vegas Strip RevPAR remains “choppy” and as concerns linger over the resilience of consumer spending, the analyst noted.

Deutsche Bank increased the firm’s price target on Caesars to $62 from $60 and confirmed a Buy rating on the shares. The analyst revised forecasts post the Q4 preannouncement.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (FLUT), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).