Analyst Sees Potential for Penn’s Interactive Segment Growth

Earlier this month, Penn Entertainment, the leading land-based and online sports betting operator, released its second quarter results. At the time, the company pointed to strong revenue of $1.66 billion for the three months ended June 30, 2024.

The result marked a slight dip compared to the $1.67 billion figure posted for the corresponding period a year earlier. Yet, the overall performance was recognized by the company’s CEO and president, Jay Snowden, as “solid.”

Now, a respected expert analyst spoke about Penn’s current position and outlined projections for the company throughout the rest of the year. Kim Noland, an analyst with GimmeCredit, who was recently quoted by Casino.org, revealed that the leading gaming and betting operator is expected to have a lower free cash flow throughout the rest of this year.

The expert explained that the decrease in free cash flow when compared to 2023 comes as a result of different investments that seek to benefit Penn’s regional casinos. According to Noland, further expenditures and losses related to the operator’s betting and iGaming businesses may also impact free cash flow this year.

Numbers for Interactive Could Improve

Traditionally, the summer is a slower season with fewer sports events on the calendar. Still, this year marked an exception considering the Olympics. A further boost is expected to arrive from the 2024 football season and per Noland’s analysis, there is room for improvement for Penn’s Interactive division.

As explained by the GimmeCredit analyst: “The numbers game for Interactive could improve as management steps up digital integration of ESPN Bet and the legacy ESPN product.” Moreover, Noland pointed out: “There is a big annual cash outlay ($150 million) required under the ESPN contract — that outlay combined with the cost of the concomitant marketing effort might pay off with longer-term increases in adjusted EBITDA. Penn’s strategic view of the interactive segment continues to rely on cross selling to retail casino customers and mass market sports fans.”

Upon the announcement of Penn’s Q2 financial results, Snowden recognized different cross-sell opportunities from ESPN Bet customers as a “key growth driver.” He explained that the company’s database continues to grow, surpassing 31 million customers. Snowden said that nearly 4 million of that total are within Penn’s digital database.

Noland acknowledged ESPN Bet’s current results are “lackluster.” Still, Penn predicted profitability for its betting business in 2026 even if it retains the current market share of approximately 7%.