Penn National: Big Bets, Bigger Losses

Regional casino operator Penn National Gaming was out with closely watched numbers this week. One, because they are one of the largest regional operators in the US, with more than 40 gaming properties in twenty states peppered across the country.

They are also followed because of their well documented struggles in their online and sports betting businesses that have made it a takeover candidate and cratered the stock more than 80% over the past several years.

In July of 2019 the company seems to be making all the right moves as they partner with DraftKings, PointsBet, and The Score and begin operating sportsbooks in 16 states, all of them bolstered by strong regional casinos owned and operated by Penn.

Things begin to go south by June of 2020 when the company spends slightly over $160 million for 36% of Barstool Sports as well as an exclusive partnership for forty years, a deal that will in fact barely make it three. The stock price was in the high $30s.

A year later, in August of 2021, the company spent $2 billion more on The Score, an integrated sports betting company and another popular sports media app with embedded betting. The stock had run up to nearly $120 a share by February, but by the time this deal was announced in August, it had fallen back to the 70s. Both deals continue to treat online casino gaming as an afterthought.

In February of 2023, they announced the purchase of the remaining 64% of Barstool Sports for $388 million; the stock is now trading back in the 30s. Four months later they announced a ”transformative” deal with ESPN. 

The deal was widely seen as a presumptive strike against the dominance of DraftKings and FanDuel, and while complicated, it saw Penn spend another $2 billion to brand and integrate its sportsbooks into the ESPN universe. The $560 million Barstool investment was sold back to original owner David Portnoy for $1. The stock tanked into the 20s. 

A quick look at an updated dictionary for underperformance may well have a Penn logo next to it, and the reason isn’t a mystery. Sports betting may have made all the hype, especially as it was legalized in over 30 states in such a short time frame.

But with 8% to 10% holds in good months, along with the requisite heavy promo spend and fierce competition from the two entrenched leaders, it was never going to be an easy road to turning a profit.

Compare that with the online casino segment. Slots and table games deliver hundreds of hands per hour, and with the right paytable or side bets at house edge rates that aren’t all that different from sports, but with dramatically more wagering volume.

A recent Stanford study found the median sports bettor places just 17 wagers a week, and among older sports bettors, only about a quarter make more than three bets a week. A decent online slots player can top that action just waiting on the metro.

Flash forward to today’s numbers, and Penn posted a $316 million revenue number for their interactive division, which was a very strong 36% jump, but they still had an adjusted EBITDA loss of $62 million. Overall revenue was a very impressive $1.7 billion, up 6% across their regional markets, probably aided by zero exposure either on the Strip or downtown Las Vegas. 

To their credit, they worked hard for the last two quarters to improve their anemic monthly active user numbers, which had peaked at around 700,000 at the end of 2023. Those numbers fell sharply throughout 2024, and this quarter came in at close to 490k, up from 465k in Q2 of 2024 but down from the peak of NFL Playoff fever in Q1 2025 when AMU reached 560k.

Penn also used some of that momentum to launch a standalone casino app in Q1 in Michigan and New Jersey after rolling it out late in 2024 in their home state of Pennsylvania. It offers up online slots, table games, and bespoke live dealer content.

It also features exclusive content from Penn Game Studios and even a new multiplayer blackjack game designed in house. Potentially the most important change was casino specific marketing and loyalty integration in the app, which finally gave them something they had not had in several years: a dedicated and differentiated online casino product. 

And that’s what makes the bigger picture so frustrating. With more than 40 regionals, Penn had the perfect foundation to build a hybrid powerhouse, linking land based loyalty programs with online casino and sportsbook play, creating cross state brand recognition and customer retention, but instead spent billions on media branding sports betting market share. 

Now even with ESPN’s built in brand recognition, they still sit in a distant sixth place nationally. They are rolling out new features this summer. Their highly vaunted FanCenter will integrate your fantasy teams with prop builders and personalized odds and their “For You” feeds will tie you directly into the teams and players you want to follow. But make no mistake, the market will be watching closely.

Boyd Gaming, long a potential suitor for Penn, has recently sold off a 1.7 billion stake in Flutter, leaving ample acquisition money in the budget, and investment groups like Donerail and HG Vora have grown more vocal about either a sale or new management. 

HG Vora in particular just managed to seat two new members on Penn’s board.

Penn’s numbers tell a story, and right now it’s a cautionary tale. Unless the potential storyline changes fast, it might well be someone else to write the final chapter.