Penn Entertainment downgraded to Hold at Craig-Hallum after ESPN ‘Hail Mary’

As previously reported, Craig-Hallum analyst Ryan Sigdahl downgraded Penn Entertainment to Hold from Buy with a price target of $30, down from $56. The process to unwind the company’s relationship with Barstool “has us perplexed,” says the firm in a note partially titled “When You Are Losing The Game, Sometimes You Need A Hail Mary.” Given the strong fundamentals of Barstool Sports and a fair value evaluation of $660M as of February, “it is hard to defend this sale process as maximizing the asset’s value for shareholders,” the analyst tells investors. Meanwhile, though the firm sees “significant potential upside with ESPN Bet,” it also notes that media partnerships in sports betting besides SkyBet in the U.K. “haven’t worked to date,” citing Penn/Barstool, FoxBet, MaximBet, Bally and Sinclair RSNs, Sports Illustrated and 888, and Pointsbet and NBC “to name a few.” Given the risks, the firm thinks it is prudent to move to the sidelines “with a cautious but positive bias” and take a “show me” approach, the analyst tells investors.