Barstool Sports could drive 'rapid share gains' for Penn National Gaming and help drive the stock 20% higher, according to Goldman Sachs

• David Portnoy's Barstool Sports could drive "rapid share gains" for Penn National Gaming and help drive shares 20% higher from Wednesday's close, according to Goldman Sachs.
• The research firm initiated Penn National at a buy with a 12-month price target of $60 on Thursday, arguing that Barstool's massive social media following can help lower customer acquisition costs for Penn National.
• In January, Penn National bought a 36% equity stake in Barstool Sports for $163 million, and has the option to acquire another 14% stake in the economy via warrants three years after the deal.
• Since the COVID-19 pandemic shuttered professional sports leagues, Portnoy has shifted his focus, as well as many of his followers, to the stock market.
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Penn National Gaming's investment in Barstool Sports could pay dividends for years to come as online sports betting begins to take off, according to Goldman Sachs.

In a research note published on Thursday, Goldman said that the regional casino operator stands to capture market share in the online sports betting market thanks to the massive social media following of David Portnoy and Barstool Sports.

The firm initiated Penn National with a buy and set a $60 price target, implying 20% upside potential from Wednesday's close.

Shares of Penn surged as much as 9% to $54.18 in Thursday trades.

In January, Penn National Gaming acquired a 36% stake in Barstool Sports for $163 million, and has the option to acquire an additional 14% of the sports-focused media company three years after the deal, via warrants.

According to Goldman, Penn National stands at the crossroads of benefiting from "a rapidly rebounding regional casino space" as well as an inflection point in sports betting.

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The key advantage Penn National has over its sports betting competitors is the massive social media following of Barstool Sports, which essentially translates into free advertising.

Between Instagram and Twitter, Barstool Sports has 56.7 million followers, compared to less than one million for DraftKings and FanDuel, Goldman highlighted.

Penn's ability to leverage a large social media following that has overlapping interests with its foray into online sports betting will allow the company to have significant lower customer acquisition costs than its competitors and "quickly take share" in the sports betting sectors, Goldman said.

Penn National is expected to launch the Barstool Sports Betting app in Pennsylvania by September.

In a bull case scenario for Barstool, if the app is able to capture similar market share as DraftKings and FanDuel (30% to 40%), it can pull in anywhere from $1 billion to $11 billion in revenue and $200 million to $2.7 billion in Ebitda at maturity, according to the note.

Since the COVID-19 pandemic shuttered professional sports leagues, Portnoy has shifted his focus, as well as many of his followers, to the stock market.

Shares of Penn National Gaming have surged 112% year-to-date.

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