PENN Entertainment, the parent company of ESPNBet, has announced plans to lay off approximately 100 employees as it shifts its focus towards the growth of its interactive business. The decision comes after PENN’s acquisition of theScore, a Canadian media and gaming powerhouse, earlier this year. In an internal email obtained by CNBC, CEO Jay Snowden expressed that these changes are intended to improve operational efficiencies.
The acquisition of theScore prompted PENN to prioritize the development of its proprietary tech stack and the migration of its sportsbook to theScore’s platform. As a result, organizational changes were temporarily put on hold. However, with the new phase of growth underway, PENN is now ready to implement these changes.
One of the key initiatives in this growth phase is the enhancement of ESPNBet, a $2 billion branding partnership with Disney’s ESPN. The company aims to deepen integration into ESPN’s ecosystem and introduce product enhancements. This move is expected to strengthen ESPNBet’s position in the highly competitive online gaming market.
Despite these efforts, some investors have grown impatient and are calling for PENN to sell the casino company. Activist investor Donerail Group has been particularly vocal about this, urging the board to pursue a sale. However, Truist gaming analyst Barry Jonas believes that a sale is unlikely in the near term due to the complexity of such a transaction and the potential need for major divestitures.
Instead of selling, PENN is focusing on cost management and demonstrating the potential of ESPNBet. The company plans to release new features for ESPNBet during the upcoming football season, which analysts expect will significantly improve the product. According to Jonas, this focus on costs indicates PENN’s commitment to delivering positive results from its investment.
Despite recent challenges, including missed earnings expectations and lowered guidance, Truist maintains a positive outlook on PENN. The firm has a buy rating on the company’s shares and a price target of $25.
In conclusion, PENN Entertainment is undergoing a period of transition and growth as it directs its efforts towards the development of ESPNBet. The company’s decision to lay off employees is driven by the desire to improve operational efficiencies and maximize the potential of its partnership with ESPN. While some investors are calling for a sale, PENN is focused on cost management and delivering a successful product. The release of new features for ESPNBet during the upcoming football season is expected to be a significant milestone for the company. Overall, Truist remains optimistic about PENN’s future and maintains a buy rating on its shares.
