Barstool Owner Penn National Misses Earnings by 49%, But Stock Rises Anyway

Penn National Gaming, owner of Barstool Sportsbook, reported earnings on Thursday morning. It missed earnings but the stock rose anyway.

Penn's earnings per share in Q4 came in at 26 cents, falling 49% short of the 51-cent target.

But Penn stock was up more than 3% to north of $46.50 in the first 30 minutes of trading on Thursday, even after its net income numbers disappointed. A year ago today, PENN closed at $109.05.

"We've got a model to make money," Penn president and CEO Jay Snowden said on the earnings call.

On Jan. 21, shares of PENN closed at a year-to-date low of $40.92. The all-time low came in March of 2020 at $7.89 when the COVID-19 pandemic began in the United States.

In the earnings report, Snowden once again boasted about Barstool helping the company to what he believes to be the lowest acquisition costs in the business, which he says will lead to the "best return on investment timelines in the industry" but the profit that Penn was supposed to make fell well short of analyst estimates.

Barstool Sportsbook took in $775M in betting handle in 2021 and held 11% — the highest in the industry and double the industry average thanks in large part to the parlays and disadvantageous odds boosts they push.

Hold refers to the percentage of money that a sportsbook wins for every dollar wagered. DraftKings and FanDuel typically hold in the 5-6% range; sharper books like Circa Sports are closer to 3%.

Penn operates 44 properties in 20 states and operates online through Barstool Sportsbook in 12. The company estimates it has 12% of the national sports betting market outside of Nevada.

Penn bought a 36% stake in Barstool in Feb. 2020 for $163 million in cash and stock. The deal terms would give Penn another 14% for $62 million to own 50% by 2023, but Snowden announced Monday the company intends to wholly acquire the brand.

Snowden, in the conference call, defended founder Dave Portnoy after a second Business Insider story came out on Wednesday about Portnoy's sex life and habits. He said to watch for Portnoy's reaction over the next couple of days.

Barstool social media accounts exceed 144 million. Off-shoot franchises include Portnoy's "One Bite" pizza app, a line of men's grooming products called "Would" and the development of sports bars. The first one opened in the Chicago suburbs, while Philadelphia will be the second location.

While the Barstool brand can bring bettors into their online sportsbook at a lower cost, the question is whether the quality of their customer is the same as a DraftKings or a FanDuel. Since Barstool appeals to a younger group, they start with a lower pot of cash, meaning they could fade faster.

"We remain encouraged by the ongoing visitation from younger demographics and are focused on reimagining properties and offerings to enhance the entertainment appeal to this steadily growing segment of consumers," Snowden said in a statement.

Penn closed the year with $5.9 billion total revenue, with 43% of its revenue coming from the Northeast, where both Penn and Barstool have more business.

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