Posted on: October 4, 2024, 05:48h.
Last updated on: October 4, 2024, 05:48h.
The 2024 football season was widely viewed as a major test for Penn Entertainment’s (NASDAQ: PENN) ESPN Bet and with the NFL campaign entering its fifth week, it appears the online sports betting entity is making progress.
In a new report to clients, Jefferies analyst David Katz acknowledged that while ESPN Bet isn’t yet pilfering significant market share from market leaders FanDuel and DraftKings, the Penn unit is bringing new bettors into the fold from ESPN’s broader platform. That’s pivotal because Penn is paying Walt Disney $1.5 billion over 10 years for use of the ESPN brand.
ESPN Bet has made significant strides toward establishing itself as a top online sports betting platform in terms of initial volume, which supports continued momentum in PENN near-term,” noted Katz.
The analyst added that ESPN Bet’s progress though important represents just a modest impact to the broader Penn Entertainment thesis and that DraftKings (NASDAQ: DKNG) and FanDuel parent Flutter Entertainment (NYSE: FLUT) remain his top two picks in the sports wagering equity space.
Some Bright Spots for ESPN Bet
While ESPN Bet has been the subject of investor criticism and scrutiny and cracking the DraftKings/FanDuel duopoly is something no competitor has proven adept at, there are some encouraging signs for the Penn unit.
Jefferies polled 302 self-described “avid sports bettors” with roughly a third saying they use ESPN Bet. Ninety-two percent said they placed their first bet with the app. Forty-one percent said they wager $51 to $100 on ESPN Bet, up from 23% in November 2023.
“ESPN Bet has not only grown the overall sports betting market, but the amount wagered by users has skewed higher with a majority of respondents betting between $51 and $200,” wrote Katz. “This trend is also apparent in the broader sports betting market with spend per customer generally increasing, which will ultimately be beneficial to the financials of the sports betting operators.”
ESPN Bet also scored well in terms of promotions and esthetic appeal.
ESPN Bet Still Has Work to Do
ESPN Bet is making progress, but there’s still work to be done. The Jefferies survey indicated that many users of the app were likely to revert to competitors upon exhausting promo funds. Additionally, bettors criticized the Penn offering for lacking the parlay depth found on DraftKings and FanDuel.
Users also complained about ESPN on-air personalities touting long odds bets or wagers that aren’t even available on the app. Those bettors told Jefferies such issues hurt ESPN Bet’s credibility. Katz pointed out that Penn has its work cut out when it comes to wresting clients away from DraftKings and FanDuel.
“The ESPN deal with PENN has proven to expand the overall sports betting market by converting non-bettors, which is a modest positive for the digital segment. However, our data also suggest there is low likelihood that bettors will switch to ESPN Bet from other platforms,” concluded the analyst. “Furthermore, we continue to see that the top two players will be minimally impacted by ESPN Bet and, instead, could gain from a growing market as the apps for both DKNG and FanDuel offer superior experiences.”
