Barstool Sports and DraftKings in Advanced Marketing Talks

Reports have emerged that Barstool Sports and DraftKings are in advanced discussions about a marketing agreement. The potential partnership could be announced shortly after the Super Bowl. This news has prompted speculation about the impact on both companies.

Analysts believe that the combination of Barstool founder David Portnoy’s appeal with younger bettors and DraftKings’ strong brand recognition could make the collaboration influential. However, it is unlikely to have a significant impact on DraftKings’ stock. Stifel analyst Jeffrey Stantial wrote in a note to clients, “We believe an exclusive agreement, if reached, further adds to and illustrates the advantages of scale.”

Stantial rates DraftKings as a “buy” with a $45 price target, suggesting an upside of 16.3% from Thursday’s close.

Last August, Penn Entertainment sold Barstool Sports back to Portnoy for just $1 after investing $551 million in the company. This move was part of Penn’s partnership with ESPN. Stantial noted that while there are low financial risks for DraftKings, there is potential for reputational risk in working with Barstool.

The types of bettors that Barstool could bring to DraftKings are mostly recreational punters, known as “stoolies”. Stantial added, “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.”

Data indicates that Penn’s recently launched ESPN Bet, the replacement for Barstool Sportsbook, is outperforming its predecessor. The potential impact of a Barstool/DraftKings relationship on ESPN Bet and other online sportsbooks is worth monitoring closely.

Stantial concluded, “We will monitor this development closely, both as it relates to our thesis and estimates for DraftKings, as well as PENN’s ESPN Bet market share and strategy.”

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