Core Insights - The U.S. online betting industry is transitioning from growth to profitability, with investors focusing on execution and balance-sheet discipline, highlighting a competitive landscape between DraftKings Inc. (DKNG) and PENN Entertainment, Inc. (PENN) [1][2] DraftKings (DKNG) - DraftKings operates as a pure-play digital operator, emphasizing scale, technology, and customer engagement to enhance long-term earnings potential [2][3] - The company is experiencing improving momentum with accelerating handle growth, stronger customer retention, and increased parlay mix, which are expected to support higher sportsbook margins over time [3] - DraftKings is expanding media partnerships and product initiatives while maintaining disciplined capital allocation, including a larger share repurchase authorization [4] - The company continues to invest in new initiatives and technology, which may affect near-term profitability, leading to uneven margins compared to peers [6] - DraftKings faces inherent volatility in sportsbook results, which can significantly impact revenue and EBITDA, creating challenges for earnings visibility [5] PENN Entertainment (PENN) - PENN has strategically reset its digital operations by exiting the ESPN BET partnership and focusing on owned assets like theScore Bet and Hollywood iCasino, which simplifies the business and reduces marketing costs [7] - The company is witnessing strong momentum in iCasino, which is increasingly viewed as a profit engine, with record revenue driven by cross-selling from online sports betting [8][9] - PENN's regional casino business provides stable cash flow and differentiates it from digital-only competitors, with strong performance in several markets and a visible development pipeline [10] - Execution risk in the Interactive segment remains a concern, particularly with the transition away from ESPN BET, which introduces uncertainty around customer retention [11] - PENN's diversified structure and focus on profitability position it favorably compared to DraftKings, especially as the industry matures [24] Stock Performance & Valuation - DraftKings shares have underperformed compared to PENN over the past six months [12] - DraftKings is trading at a premium on a forward 12-month price-to-sales (P/S) ratio compared to PENN [16] - The Zacks Consensus Estimate for DKNG's 2026 earnings implies a year-over-year improvement of 100.4%, while PENN's estimate suggests a 116.4% improvement [18][21] Conclusion - PENN Entertainment is currently better positioned than DraftKings due to its balanced business model, digital reset, and stable cash flow from regional casinos, while DraftKings remains more exposed to sportsbook volatility and investment needs [24]

Core Insights - Penn Entertainment has ended its exclusive U.S. online sports betting partnership with ESPN earlier than expected, effective December 1, 2025, after mutual agreement due to missed market share goals [2][3] Company Overview - Penn Entertainment operates a portfolio of land-based casino and racetrack properties across multiple states, alongside significant digital gaming and sports-betting platforms, with a market capitalization of approximately $2 billion [3] Partnership Details - The partnership with ESPN, initiated in August 2023, was a 10-year deal costing Penn $150 million annually plus stock warrants for the rights to the ESPN BET brand [2] - ESPN contributed nearly 3 million users to Penn's platform, but both parties agreed to amicably wind down the partnership [2][3] Stock Performance - Over the past 52 weeks, PENN stock has declined by 29%, currently trading down 34% from its 52-week high of $23.08 [4] - Year-to-date, the stock is down approximately 23%, with a recent 6.5% decline in just the past five days due to strategic moves like the early termination of the ESPN deal [4] - PENN stock is trading at a discount to industry peers at 0.32 times forward sales [5]

Retail Segment Performance - Retail segment demonstrated strong resilience, with gaming volumes rebounding in March and remaining consistent through April and early May[7] - April retail trends were stable, showing year-over-year revenue growth across properties, especially those unaffected by new supply[13] - Total retail revenue growth in April was +2%, but excluding new supply markets, the growth was +4%[14] Interactive Segment Performance - Interactive segment generated record gaming revenue and significant year-over-year improvements in both Adjusted Revenue and Adjusted EBITDA[7] - Q1 2025 Interactive Adjusted Revenue reached $161.9 million[57] - The company saw a $71 million year-over-year Adjusted Revenue growth in the Interactive segment[26] - The company saw a $107 million year-over-year Adjusted EBITDA improvement in the Interactive segment[26] - iCasino momentum is building, supported by the standalone iCasino app in PA and MI[7] - iCasino business continues to grow, achieving record NGR and average MAUs in Q1 2025, with +20% Q1 year-over-year growth in average MAUs[33][34] Strategic Initiatives - The company repurchased $35 million of shares year-to-date and remains committed to repurchasing at least $350 million of shares this year[7] - The company announced the landside relocation of Ameristar Council Bluffs in Iowa, with an estimated project budget of approximately $180-$200 million[7][19]