Portnoy complaint: Initial reaction to Penn National Gaming’s missed Q3 forecasts yesterday afternoon was quickly overtaken by a Business Insider article about Barstool Sports founder Dave Portnoy’s alleged treatment of women. Portnoy denied the allegations and followed up with a nine-minute video on Twitter in which he questioned Insider’s motives. PNG shares dropped 9% when its Q3s came out, this turned into a 20%+ drop in the wake of the Insider story.
Unwanted scrutiny: Analysts were generally sanguine. Truist lowered 21-23E EBITDAR by 4-6% and pointed out that “Portnoy has weathered similar storms in the past”. However, “multiple constituents may need clarity on the situation before we can fully understand the longer-term ramifications for Barstool and Penn.” The team at Wells Fargo said a ~20% drop in share price “may seem harsh”, but gambling is a highly-regulated industry and such stories invite “unwanted scrutiny and become a major distraction” for both management and investors.
“Timing is also not ideal given recent concerns on excessive USSB marketing/promotions and calls for more responsible gaming,” the Wells Fargo team added.
Overreaction: The Credit Suisse team suggested the share price reaction yesterday was “overdone” with the implied multiple of 8x FY23 Street EBITDA estimates suggesting zero value was being ascribed to either Barstool or the recent Score Media & Gaming acquisition. “We think that Score Media & Gaming was one of the most attractive takeover targets in OSB, and that the launch in Canada (now expected in 1Q22) can be a real catalyst for shares.”
Talking point: The high-profile nature of the sports-betting sector right now is perhaps unprecedented and certainly the media profile of the likes of Portnoy and Robins is something new. They would like to see themselves as being at the forefront of multimedia, lifestyle brands with key positions in a wide spread of marketplaces, from NFTs to new media with bookmaking somewhere in the mix. The outside world – and particularly punters – might opt to see them as something different.
Additional articles available in Earnings + More weekend update:
