With the launch of ESPN Bet, Penn Entertainment PENN got a bullish call from a leading sports betting analyst and saw its price target raised after the sportsbook went live.
The PENN Analyst: Bank of America analyst Shaun C. Kelley upgrades Penn shares from Neutral to Buy and raises the price target from $27 to $30.
Related Link: Penn Entertainment Q3 Earnings Highlights
The Analyst Takeaways: A top ranking on the app charts is among the reasons Kelley is upgrading shares of Penn Entertainment.
"We think ESPN Bet creates an asymmetric risk-reward, with 1) initial download and app activity much stronger than anticipated, 2) initial offers showing promotional discipline, and 3) stable Q3 earnings being better than expected for PENN's core gaming business," Kelley said.
The analyst highlighted ESPN Bet ranking number one on the sports apps chart and number one on the overall free apps chart after launching.
An estimate from Sensor Tower shows 865,000 downloads of the ESPN Bet app, which Penn Entertainment launched through a licensing deal with The Walt Disney Company DIS.
"While skepticism centered on ESPN's support of the launch, we see encouraging signs with full-screen takeovers on the app/web and early content mentions."
The analyst said Penn will need to prove its retention capabilities of customers, improve its technology and expand to new states. "But it's an encouraging start."
Kelley said ESPN Bet could hit 6% to 7% market share for the online sports betting segment and a 2% market share of iGaming.
The analyst's price target comes with an assigned value of $20 to $25 for the base Penn business and around $8 for ESPN Bet. The analyst sees a potential range of $7 to $15 for the ESPN Bet business, with each 1% of market share worth around $2 to the Penn stock price target.
PENN Price Action: Penn shares are up 7.5% to $26.42 on Monday, versus a 52-week trading range of $18.35 to $37.59.
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