BofA sees ‘constructive risk-reward’ for Penn entering ESPN betting deal

BofA analyst Shaun Kelley notes that Penn Entertainment (PENN) shares were up “big” in after-hours trading while DraftKings’ (DKNG) shares were down after Penn made two strategic announcements: an exclusive U.S. online sports betting agreement with Disney’s (DIS) ESPN and selling Barstool Sports back to founder David Portnoy. BofA attributes much of the reaction to a cautious investor setup for Penn given both domestic core gaming concerns and uncertainty around Barstool and says it sees “a constructive risk-reward” for Penn entering the deal with ESPN, but the firm is also increasingly convinced that the product and tech barriers DraftKings and Flutter’s (PDYPY) FanDuel are creating make market share moves increasingly difficult. BofA maintains a Neutral rating and $35 price target on Penn shares and keeps a Buy rating and $38 price target on DraftKings.