The November launch of Penn Entertainment’s ESPN Bet was hailed an unequivocal success, with the rebranded betting app ranking first in iOS downloads.
But when it comes to the app’s monetary impact, it’s still operating in the red, with Bloomberg reporting that Penn’s interactive gambling unit lost $333.8 million in the fourth quarter of 2023 due to costs associated with ESPN Bet’s Nov. 14 launch.
While losses were expected, the nearly $334 million figure exceeded Wall Street’s expectations. As a result, Penn saw its stock fall by more than 15 percent on Thursday — its biggest intraday loss since last May.
“Investors were bracing for a wide range of interactive losses, but the magnitude of the absolute dollar value is, we think, surprising,” analysts at JPMorgan Chase & Co. said in a note, according to Bloomberg.
In a call with investors, Penn said that the initial downloads for ESPN Bet exceeded the company’s projections, with more than one million customers signing up through the first two months. Unsurprisingly, many customers were drawn to the app’s promotional signup offer of $200 bonus bets, which was cut in half ahead of Super Bowl LVIII.
As for the future, Penn anticipates that losses, while more limited than last quarter, will continue through 2024. The company projects that ESPN Bet will break even by 2025 before producing “meaningful” cash flow in 2026.
While losses may have been expected, it’s obviously notable that they exceeded expectations and that Wall Street responded accordingly. After previously operating a Barstool Sports-branded sportsbook, Penn sold the company back to founder Dave Portnoy for just $1 last year, while also reaching a 10-year, $1.5 billion licensing agreement with ESPN to rebrand its mobile sportsbook.
Despite the losses, Penn is clearly remaining aggressive. Earlier this week, the company announced that it has purchased WynnBet’s mobile sports gambling license in New York for $25 million.
“This is an important development that will bring ESPN BET to the largest regulated online sports wagering market in North America,” PENN Entertainment CEO Jay Snowden said in a press release. “Together with ESPN, we’re building a brand that is synonymous with sports betting, and operating in the New York market is key as we grow ESPN BET across the U.S.”
