Bet On It: Penn migrates Barstool Sportsbook & Casino in-house

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: Total gaming revenue reported by casinos, racetracks, and their partners was $457.2M for June, reflecting a 13.9% increase from $401.5M reported in June 2022. For year-to-date, total gaming revenue reported by casinos, racetracks, and their partners was $2.73B, reflecting a 12.1% increase from $2.43B reported in the prior period. Based upon filings with the Division of Gaming Enforcement, Casino Win for the nine casino hotel properties was $241.6M for June, reflecting an increase of 5.4% when compared to $229.1M for June 2022.  For the month of June 2023, Internet Gaming Win reported by casinos and their partners was $149.3M, reflecting growth of 12.1% compared to $133.1M for the prior period. Sports Wagering Gross Revenue reported by casinos, racetracks, and their partners was $66.4M for June, reflecting a 69.1% increase when compared to $39.2 million in the prior period. 

Penn Entertainment (PENN) announced that it has released a new and improved Barstool Sportsbook & Casino following the full-scale migration to the company’s proprietary online gaming technology platform. The migration to Penn’s custom technology stack in the U.S. brings all components of its online gaming operation in-house. The migration to the technology platform was completed simultaneously across all 16 jurisdictions where Barstool Sportsbook operates during the MLB All-Star Break. The platform deployment and product upgrade completes the objective to achieve technology independence, which includes the acquisition of Score Media and Gaming and launch of Penn Game Studios in 2021. Custom built for the North American market, the vertically integrated technology stack increases platform stability and is designed to be scalable to expand into new markets and meet evolving regulatory requirements. The company noted it has fully upgraded the Barstool Sportsbook product with numerous “enhancements,” including:

• Streamlined navigation and search across sportsbook markets and casino games
• More wagering markets, including expanded player props and in-game betting
• Greater personalization capabilities, enhanced promotions and more Barstool exclusive offers
• Faster load times, deposits and withdrawals
• Improved cash out availability
• Deeper integrations with theScore media app, allowing users to build and track their betslips within theScore

Bally’s (BALY) has entered into a strategic partnership with Stakelogic, a live casino supplier. The partnership follows the passage of the Rhode Island iGaming bill, which occurred on June 22, extending Bally’s role as the sole active casino operator in the state to now include iGaming. As part of their partnership, Bally’s will leverage Stakelogic’s software and studio technology to launch Bally’s live casino in North America. Bally’s intends to offer popular online live casino games such as Blackjack, Roulette and Baccarat in Rhode Island beginning in April 2024. Stakelogic has two live casino studios in Europe, a portfolio of over 250+ slot games, as well as live dealer technology.

Gambling.com (GAMB) has extended its reach in the U.K. through a new media partnership with Independent Digital News and Media Limited, one of the U.K.’s largest digital media publishers. Under the agreement, Gambling.com Group will deliver sports betting and online casino content for sports enthusiasts to leverage The Independent’s reach, which counts over 20.8M monthly unique users. The content and exclusive offers will be featured on a special section of The Independent’s website, www.independent.co.uk. The partnership with The Independent is the first media partnership the Group has entered into outside of the U.S.

RETURN TO THE SUNSHINE STATE: There’s a chance Floridians may be able to place some online sports bets in time for football season, according to Martin Vassolo of Axios Miami, citing gambling law experts. A June ruling by a federal appellate court upholding the pact between the Seminole Tribe and the state could reportedly be finalized as early as August 21. However,, further legal challenges are possible. “We’re figuratively at halftime,” gaming law attorney Daniel Wallach toldAxios. “There are too many unknowns and unknowables.”

ANALYST COMMENTARY: Piper Sandler raised the firm’s price target on DraftKings (DKNG) to $35 from $30 and kept an Overweight rating on the shares. Despite the uncertainty persisting for the vertical marketplaces, trends for the most part have been better than feared, the firm told investors in a research note. Consumer spending trends, digital advertising dynamics, the impact of artificial intelligence, and the pivot to profitability are key themes across the group in the back half of the year, noted the firm. 

Morgan Stanley upgraded Boyd Gaming (BYD) to Equal Weight from Underweight with a price target of $75, up from $69. The firm is citing strong Digital performance through its relationship with Fanduel (PDYPY) and better brick & mortar results. The firm remains concerned around the near-term trends for Boyd’s regional business, but its Digital segment remains one of the best organic growth stories within Gaming. The firm additionally raised the firm’s price target on Las Vegas Sands (LVS) to $71 from $69 and maintained an Overweight rating on the shares. The firm also names the stock its new Top Pick in the Gaming space. The company represents the best way to play Macau and one of the final consumer recovery stories coming out of Covid, Morgan Stanley told investors in a research note. Las Vegas Sands should see increased market share as it has invested $2B across two Macau properties during the pandemic, while the company’s other major property in Singapore continues to generate positive trends and boasts a pristine balance sheet, the firm added.

BTIG raised the firm’s price target on DraftKings to $34 from $31 and backed a Buy rating on the shares. The analyst is adjusting the firm’s model to reflect strong gross gaming revenue reports and the late September Kentucky sports betting launch, with mobile sports betting now expected to launch in the state on September 28th. The firm sees DraftKings as a 20% or more multi-year top-line grower with stable if not increasing share, room for both hold and margin improvement, and improving balance-sheet flexibility.

Wells Fargo lowered the firm’s price target on Caesars (CZR) to $73 from $74, raised the firm’s price target on Boyd Gaming to $83 from $82, lowered the firm’s price target on Churchill Downs (CHDN) to $150 from $155, raised the firm’s price target on Wynn Resorts to $138 from $134, The firm favors Macau stocks for Q2 earnings, as they’re well-positioned for beats/raises and and re-gaining momentum into Macau’s busy summer months, Wells Fargo contended in a research note. The firm reiterated an Overweight rating on all four stocks.

JMP Securities raised the firm’s price target on Genius Sports (GENI) to $9 from $8 and increased the firm’s price target on DraftKings to $33 from $31. The firm reaffirmed an Outperform rating on the shares of both companies. Genius Sports has performed well year-to-date, while the firm sees upside on the back of future catalysts, including the free cash flow inflection and new U.S. legalization, JMP told investors. On DraftKings, the firm said online gaming results were incrementally positive in Q2, supported by improvement in industry hold, a consistent iGaming sector, and low promotional spend. JMP Securities believes quarterly results should highlight top-line strength with U.S. sports betting revenue up 55% y/y and iGaming up 21% y/y.

Barclays upped the firm’s price target on Las Vegas Sands to $70 from $69 and raised the price target on MGM Resorts to $62 from $60, while keeping an Overweight rating on both names. The analyst expects earnings upside for Macau gaming in Q2, helped by stronger post-COVID margins, and upbeat commentary heading into the strongest seasonal period.

BofA analyst Shaun Kelley upgraded DraftKings to Buy from Neutral with a price target of $35, up from $25. Accelerating product and revenue momentum are “on the cusp” of driving an inflection in margins and profitability, the firm told investors. Though the stock has outperformed in 2023, the firm thinks market share gains can drive near-term top line revisions, while cost leverage should drive bigger revisions in adjusted EBITDA than anticipated.

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), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).