Bet On It: Penn completes full acquisition of Barstool Sports

DraftKings and Bally’s both gain following earnings, Flutter sets sight on U.S. listing, and other notable stories in the sports betting and iGaming space

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) completed its previously announced acquisition of Barstool Sports after previously acquiring a 36% stake of Barstool Sports in February 2020. Penn has acquired the remaining interest in Barstool Sports for approximately $388M. "We are extremely pleased to welcome Barstool Sports fully into the PENN Entertainment family," said PENN Entertainment CEO and President, Jay Snowden. "Barstool is a proven, powerful media brand with an authentic voice and vast, loyal audience that provides us with a strong top of funnel for new customer acquisition and organic cross-selling opportunities across our growing interactive division. Barstool, combined with theScore’s reach and highly engaged user base, creates a massive digital footprint and ecosystem that will serve to propel Barstool Sportsbook and our uniquely integrated media and gaming business. Further, the Barstool Sportsbook will greatly benefit from the upcoming migration to our proprietary technology stack, a move that will significantly enhance the overall product offering and deliver meaningful upside."

The XFL announced that Genius Sports (GENI) has been named the Official Betting Data Distribution Partner and Free-to-Play Provider of the League. "Genius Sports has been granted the exclusive rights to distribute official data from every XFL game to its global network of media and betting partners. Sportsbooks will be provided with the fastest, most accurate feed of XFL data, while brands and advertisers will be able to access official XFL data through the Genius Marketing Suite, an all-in-one fan engagement platform. To help the XFL expand its digital audience and drive fan engagement levels, Genius Sports has built a new ‘XFL Pick’Em’ game. This free-to-play game asks fans to predict the outcome of upcoming XFL matchups, including various proposition bets related to games, players, and teams. To gamify the experience, fans are asked to bet with football tokens, creating parlays to increase their potential score and improve their ranking on the league-wide leaderboard," the company stated.

CNE Gaming Holdings, an indirect subsidiary of Cherokee Nation Businesses, officially assumed operations of Gold Strike Casino Resort after receiving approval from the Mississippi Gaming Commission. CNE Gaming Holdings purchased the operating company from Mandalay Resort Group, a subsidiary of MGM Resorts International (MGM), for approximately $450M in cash. The Mississippi Gaming Commission issued its determination of suitability and approval of the acquisition in January. Concurrent with the purchase, the operating entity entered into a long-term lease agreement with GSCR Propco LLC, a subsidiary of VICI Properties (VICI), which owns the real property associated with Gold Strike Casino Resort.

Anaxi, Aristocrat’s (ARLUF) online Real Money Gaming business, announced a strategic partnership with BetMGM (MGM, GMVHF). "World class gaming content from Aristocrat will first be available via BetMGM online casino," the companies stated.

Caesars (CZR) and SL Green Realty (SLG) announced a new Caesars Rewards partnership for local merchants in greater New York City as a part of their pursuit of a gaming license in Times Square. When Caesars Palace Times Square opens in Manhattan, Caesars Rewards members will be able to use their Reward Credits by converting them to gift cards, valid across the Caesars Rewards Gift Card Network, including participating hotels, restaurants, retailers, comedy clubs, entertainment venues and more across New York. Caesars and SL Green have begun signing up new merchants in Times Square and greater New York to join the Coalition for A Better Times Square. Participating merchants’ involvement in Caesars Rewards would be effective upon SL Green and Caesars’ procurement of a New York State gaming license.

Everi Digital, the online gaming business of Everi Holdings (EVRI), announced it has entered into an agreement with Caesars Sportsbook & Casino (CZR) to provide its online gaming content for the operator’s real-money online gaming operations. All content will be delivered via Everi’s proprietary Spark Remote Game Server, which houses the company’s Digital’s iGaming catalog. High-performing titles, such as Triple Jackpot Gems, Crystal Star, and Black Diamond, are among the nearly 70 engaging themes available via Spark RGS.

Boyd Gaming (BYD) raised its quarterly dividend to 16c per share from 15c per share. The dividend is payable April 15, 2023, to shareholders of record at the close of business on March 15, 2023.

EARNINGS RESULTS: Shares of DraftKings (DKNG) were over 4% higher last night after the company’s Q4 earnings release. The company’s earnings beat included monthly unique payers, or MUPs, up to 2.6M. and average revenue per MUP was $109. In addition, the company raised its full-year 2023 revenue and adjusted EBITDA guidance. "I am very pleased with how we concluded 2022, with continued top-line growth and strong focus on expense management," said Jason Robins, DraftKings’ CEO and co-founder. "In the fourth quarter, we grew revenue by 81% versus last year and delivered positive Adjusted EBITDA in October and for the quarter when adjusting for our launch costs in Maryland and Ohio. Moving into 2023, we will continue to drive revenue growth and focus on expense management to accelerate our Adjusted EBITDA growth. We have already taken several actions that resulted in an increase to our revenue guidance and significant improvement in our Adjusted EBITDA guidance."

BTIG analyst Clark Lampen upgraded DraftKings to Buy from Neutral with a $24 price target. A divergence in player adoption and marketing cost trends has driven upside versus EBITDA expectations for DraftKings throughout 2022, and this pattern will persist in 2023, the analyst told investors in a research note. The firm believes the positive implications of the company’s Q4 report aren’t fully reflected in the stock. DraftKings’ fundamental levers for further beats are in place for 2023 and 2024, and the company is now in a stronger competitive position with a line of sight to positive cash flow and room to be more aggressive with growth investments, BTIG contends.

Bally’s (BALY) also reported preliminary Q4 earnings this week. The company’s projected revenue for the quarter came in above analyst expectations. Preliminary Q4 financial highlights include: net loss of $476.8M; adjusted EBITDA of $145.8M and adjusted EBITDAR of $164.4M. The company did provide FY23 revenue outlook just ahead of consensus. At the same time as the company released the quarterly results, Bally’s also announced that Lee Fenton, CEO, will step down and Robeson Reeves, president – interactive, will take over as CEO, effective March 31. Fenton became CEO of Bally’s on October 1, 2021 following the acquisition of Gamesys Group where he had been CEO since 2015. Fenton will also step down from the Bally’s board of directors. Reeves said, "As our businesses continue to integrate, we are pleased to achieve record results in both our Casinos & Resorts and International Interactive segments. Our core businesses are generating fantastic cash flows. UK revenue grew 12% organically in the fourth quarter as regulations continue to play through, while in December, Asia saw positive year-over-year organic growth, proving that our initiatives to maintain a competitive advantage in that market are effective." Reeves, continued, "Simply put, our North America Interactive results in 2022 were unacceptable. In response, through our announced restructuring plan of the Interactive business in January, we are taking a deep dive in our approach to North America to ensure that investments we make in sports have a near-term path to profitability. In iCasino states, we continue to take share in New Jersey and Ontario as we integrate this business in a scalable way. As part of the restructuring, we are evaluating multiple options, including leasing technology structures that integrate quickly and effectively with our world class iCasino and Marketing tech stacks. We also expect our restructuring efforts to drive benefits in our International Interactive segment."

Deutsche Bank analyst Carlo Santarelli lowered the firm’s price target on Bally’s to $20 from $23 and keeps a Hold rating on the shares following the company’s preliminary Q4 results.

TOP 3: The top three states to take in bets for the Super Bowl were:

1. Nevada ($153M)
2. New York ($124M)
3. New Jersey ($109M)

EYES ON U.S. LISTING: Flutter Entertainment (PDYPY) stated in a notice to the London Stock Exchange: "The Flutter Board regularly evaluates how best to position the Group to deliver its strategy in the interests of shareholders. One of the matters the Board has been assessing for some time is the Group’s listing structure. The capital markets day held in New York on 16 November 2022 highlighted the growing importance of FanDuel to the Group as a whole. This trend is expected to continue, with FanDuel becoming the Group’s largest business by revenue and an ever-greater proportion of its overall value. In this context, the Board has reached a preliminary view that an additional US listing of Flutter’s ordinary shares will yield a number of long-term strategic and capital market benefits. The Board believes these benefits would include: enhancing the Group’s profile in the US; better enabling the recruitment and retention of US talent; giving the Group access to much deeper capital markets, and to new US domestic investors; providing greater overall liquidity in Flutter shares; and the optionality to pursue, as a second step, a primary US listing – one of the criteria for access to important US indices. The Board appreciates that this is an important topic for shareholders and intends to consult extensively before deciding whether to put forward a formal resolution for approval. The Group expects to start this consultation immediately. In the event that there is broad shareholder support for an additional US listing, this would take precedence over any plans to list a small shareholding in FanDuel. The results of the consultation will be announced in due course."

ADDITIONAL ANALYST COMMENTARY: Craig-Hallum raised the firm’s price target on DraftKings to $27 from $21 and reiterated a Buy rating on the shares. The company reported a "strong beat/raise" with the biggest surprise being the cost efficiencies evident in Q4 results and revised 2023 guidance, the analyst tells investors in a research note. The analyst sees an "important pivot" in management’s mindset from not just growth but also expenses. In addition, industry conditions improved in the second half of 2022 and DraftKings is taking share, contended the firm. Hallum thinks investor sentiment is "starting to turn" and continues to believe DraftKings will be one of the few long-term winners in the sector. 

Stifel analyst Jeffrey Stantial lowered the firm’s price target on Bally’s to $21 from $22 and kept a Hold rating on the shares. The firm said that the company’s pre-released Q4 results were modestly below consensus. Still, Stifel sees more positives than negatives in the announcement, though the firm "feels comfortable" with its Hold rating for the time being given still outsized macro, regulatory, and execution risks.

Jefferies analyst David Katz notes that Bally’s announced preliminary earnings for Q4 and guidance for full year 2023. The announcement, which reflects modest upside to Q4 and in-line guidance for 2023, supports the firm’s view that the company continues to evolve its strategies and leadership, which obfuscate the longer-term earnings power and value for the shares. Jefferies believes there is meaningful value in the land-based business and the global digital business, which is in the process of being defined. Absent improved earnings visibility, the firm remains conservative on the shares, with a Hold rating on the names and a price target of $24.

Canaccord raised the firm’s price target on DraftKings to $30 from $28 and keeps a Buy rating on the shares after the company reported Q4 revenue and profitability "well ahead" of consensus forecasts. The company is seeing states reach positive contribution profit faster than originally anticipated, noted the firm, which said it is "encouraged" by DraftKings’ ability to deliver cost savings and operational efficiency without sacrificing revenue growth.

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 (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI) and Wynn Resorts (WYNN).

Keywords: Super Bowl, online sports betting, Barstool Sports, Gold Strike Casino Resort, online gaming, earnings