Penn Entertainment (NASDAQ:PENN) faced a challenging day on Thursday as its stock tumbled by as much as 15% following the release of its first full quarterly earnings incorporating data from ESPN Bet. The stock closed at $15 a share, marking an 8.76% decrease from the previous day’s close.
Despite reporting overall revenue of $1.61 billion for the first quarter, which was in line with consensus estimates, the company’s online segment, including ESPN Bet, fell short with revenue reaching only $208 million, below expectations of approximately $237 million. Additionally, losses per share amounted to $0.76, lower than consensus estimates of $0.59.
The disappointing results immediately impacted the stock’s performance, prompting Jefferies analysts to suggest that the lower-than-expected figures could modestly weigh on the shares. They emphasized ESPN Bet’s evolving customer base and product as key factors to monitor, with potential outcomes still several quarters away.
This quarter marked the first full period to include data from ESPN Bet, following Penn’s decision to end its partnership with Barstool Sports and enter into a $2 billion agreement with Disney to create ESPN Bet. The transition was aimed at leveraging ESPN’s brand and extensive sports network to attract customers at a lower cost compared to other sportsbooks.
Despite the strategic shift, Penn’s online revenue of $208 million represented a slight decrease from the previous year, reflecting the nascent stage of ESPN Bet compared to Barstool Sportsbook. The digital segment also posted adjusted EBITDAR losses of $196 million, typical for the early stages of a sportsbook’s launch as it expands into new markets and invests in promotional activities.
Penn CEO Jay Snowden acknowledged that some of the online segment’s challenges were exacerbated by unfavorable sports outcomes. However, he remained optimistic about prospects, highlighting plans for new integrations with ESPN’s digital and fantasy products to drive higher user engagement and spending.
Looking ahead, Snowden emphasized a focus on enhancing product offerings, particularly ahead of the upcoming football season, including a revamped home screen and expanded parlay options, to capitalize on the early adoption and engagement observed with ESPN Bet.
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