Barstool, DraftKings Partnership Could Be Interesting, Says Analyst

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Posted on: January 25, 2024, 05:21h. 

Last updated on: January 27, 2024, 11:02h.

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On Wednesday, reports surfaced that Barstool Sports and DraftKings (NASDAQ: DKNG) are successful precocious talks regarding a trading agreement.

DraftKings sports betting commercialized Kevin HartKevin Hart successful a DraftKings commercial. The company’s imaginable business pinch Barstool Sports could disrupt rivals. (Image: DraftKings)

While nan business — which could beryllium announced soon aft nan Super Bowl — is expected to beryllium basic, it amounts to Barstool laminitis David Portnoy and his unit rejoining nan sports betting scenery pinch an avenue to profit. It is doing truthful pinch 1 of nan largest online sportsbook operators.

The operation of Portnoy’s expertise to link pinch younger bettors and DraftKings’ enviable marque nickname could besides beryllium potent. Those could beryllium among nan reasons analysts position nan imaginable statement arsenic perchance intriguing, though it apt lacks worldly effect for DraftKings’ stock.

We deliberation it is excessively early to tie meaningful conclusions backmost to DraftKings’ stock, while location is besides nary guarantee than an statement is reached erstwhile nan lock-up play expires astatine nan extremity of NFL season,” wrote Stifel expert Jeffrey Stantial successful a statement to clients. “Barstool is apt exploring aggregate options, and Dave Portnoy has proven a shrewd negotiator. That said, we judge an exclusive agreement, if reached, further adds to & illustrates nan advantages to scale.”

Stantial rates DraftKings a “buy” pinch a $45 value target, which implies upside of 16.3% from Thursday’s close.

Risk/Reward for DraftKings

Last August, aft investing $551 cardinal to get Barstool Sports, Penn Entertainment sold nan institution backmost to Portnoy for conscionable $1. That was portion of nan location casino operator’s move to partner pinch ESPN.

Following that deal, Portnoy acknowledged his arguable quality may person costs Penn sports betting licenses successful immoderate states. On a related note, Stantial observed that while financial risks to DraftKings are low, location is imaginable for immoderate reputational consequence successful moving pinch Barstool.

As for nan types of bettors Barstool could bring to DraftKings, it’s probable that “stoolies” — nan colloquial word for Barstool devotees — are mostly recreational punters.

“High mean grip per personification for loyal Barstool gamblers seems to conflict pinch DraftKings’ inclination to limit crisp bettors, though we consciousness location are apt much squares than sharps successful that high-spending bequest Barstool personification cohort,” added Stantial.

Impact On ESPN Bet Worth Monitoring

Data bespeak that Penn’s precocious launched ESPN Bet, nan operator’s replacement for Barstool Sportsbook, is outperforming its predecessor. While Barstool Sportsbook’s grip was debased successful nan states successful which it operated, it’s imaginable that immoderate stoolies are now ESPN Bet customers, and they could migrate to different app pinch nan endorsement of Portnoy.

In different words, a Barstool/DraftKings narration could effect ESPN Bet and different online sportsbooks.

“We besides statement nan expiration of Barstool’s lock-up play and imaginable trading business pinch a competitor comes astatine a clip erstwhile proving retired ESPN Bet personification retention is critical. As such, we will show this improvement closely, some arsenic it relates to our thesis & estimates for DraftKings, arsenic good arsenic PENN’s ESPN Bet marketplace stock & strategy,” concluded Stantial.

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