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On Wednesday, reports surfaced that Barstool Sports and DraftKings (NASDAQ: DKNG) are in advanced talks regarding a marketing agreement.
While the partnership — which could be announced soon after the Super Bowl — is expected to be basic, it amounts to Barstool founder David Portnoy and his crew rejoining the sports betting landscape with an avenue to profit. It is doing so with one of the largest online sportsbook operators.
The combination of Portnoy’s ability to connect with younger bettors and DraftKings’ enviable brand recognition could also prove potent. Those could be among the reasons analysts view the potential arrangement as potentially intriguing, though it likely lacks material impact for DraftKings’ stock.
We think it is too early to draw meaningful conclusions back to DraftKings’ stock, while there is also no guarantee than an agreement is reached when the lock-up period expires at the end of NFL season,” wrote Stifel analyst Jeffrey Stantial in a note to clients. “Barstool is likely exploring multiple options, and Dave Portnoy has proven a shrewd negotiator. That said, we believe an exclusive agreement, if reached, further adds to & illustrates the advantages to scale.”
Stantial rates DraftKings a “buy” with a $45 price target, which implies upside of 16.3% from Thursday’s close.
Risk/Reward for DraftKings
Last August, after investing $551 million to acquire Barstool Sports, Penn Entertainment sold the company back to Portnoy for just $1. That was part of the regional casino operator’s move to partner with ESPN.
Following that deal, Portnoy acknowledged his controversial nature may have cost Penn sports betting licenses in some states. On a related note, Stantial observed that while financial risks to DraftKings are low, there is potential for some reputational risk in working with Barstool.
As for the types of bettors Barstool could bring to DraftKings, it’s probable that “stoolies” — the colloquial term for Barstool devotees — are mostly recreational punters.
“High average handle per user for loyal Barstool gamblers seems to conflict with DraftKings’ tendency to limit sharp bettors, though we sense there are likely more squares than sharps in that high-spending legacy Barstool user cohort,” added Stantial.
Impact On ESPN Bet Worth Monitoring
Data indicate that Penn’s recently launched ESPN Bet, the operator’s replacement for Barstool Sportsbook, is outperforming its predecessor. While Barstool Sportsbook’s handle was low in the states in which it operated, it’s possible that some stoolies are now ESPN Bet customers and they could migrate to another app with the endorsement of Portnoy.
In other words, a Barstool/DraftKings relationship could have an impact on ESPN Bet and other online sportsbooks.
“We also note the expiration of Barstool’s lock-up period and potential marketing partnership with a competitor comes at a time when proving out ESPN Bet user retention is critical. As such, we will monitor this development closely, both as it relates to our thesis & estimates for DraftKings, as well as PENN’s ESPN Bet market share & strategy,” concluded Stantial.
The post Barstool, DraftKings Partnership Could Be Interesting, Says Analyst appeared first on Casino.org.
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