We've seen viral web content produce money-doubling returns for investors over the last couple years. GameStop Corp. (NYSE: GME), Bitcoin (BTC), and Dogecoin (DOGE) are all examples of investments that owe their growth to mass enthusiasm from a section of the Internet.
That isn't going away. Right now, if something is popular online, there is probably a way to make money on it, directly or indirectly.
Barstool is one of those opportunities. But you can't just go and buy Barstool stock on Robinhood.
Still, there is a way you can get a piece of this $450 million company without buying shares. It's a publicly traded company that profits directly from Barstool's success.
The more publicity the Barstool brand can generate, the more money this company will make in the next decade.
As a bonus, the company is already a monster in an industry poised for 150% growth.
We'll show you that company in just a second. First, here's why Barstool has all the ingredients to go - and stay - viral.
Why Barstool Sports Is a Marketing Machine
It's hard to separate the success of Barstool Sports from its founder, Dave Portnoy.
The celebrity entrepreneur is a prominent critic of just about everything from pizza to stocks, to the NFL, to the government's handling of the 2020 pandemic.
There's a steadily growing cult of personality around his name.
Portnoy was banned from the 2019 Super Bowl after trying to enter a press conference with a fake press pass. So, in Portnoy fashion, he wore a fake moustache to the Super Bowl.
Security recognized him anyway, and he was dragged out.
Fortunately, this was right on brand with Barstool, a newsletter for lovers of sports, low humor, and leisure. Portnoy proudly assumes the role of spokesperson for the "average Joe."
The best example of this was when the mogul raised nearly $30 million to save small businesses affected by the pandemic. He was featured on several news stations decrying COVID-19 lockdowns, and later the Robinhood trading freeze.
Love him or hate him, Dave is who he is. And that's what his readers like.
He's built this die-hard fanbase over the last 17 years, and it's still growing. Many of those fans are loyal enough to want some Barstool stock on principle.
But traders today have a chance at something far better.
While Barstool is not publicly traded, there is a way you can get a hand in the company and seize on a major industry set to pop 150%.
It's all because of what happened at the start of 2021...
Penn National Gaming Owns Barstool
In January, Dave Portnoy, President of Barstool Sports, agreed to sell his company to Penn National Gaming Inc. (NASDAQ: PENN), a sports betting company.
Unlike Barstool, Penn National is publicly traded. That means anyone looking for a stake in Barstool can simply buy shares of Penn.
Right now, Penn has a 36% stake for $163 million cash and stock. As part of the agreement, Penn will pay another $62 million in three years to arrive at a 50% stake and a shot at majority ownership.
For its size, Barstool is a solid company to own. It generated between $90 million and $100 million in revenue in 2020. Portnoy's growing popularity could help boost the brand even further.
This will be money in Penn National's pocket.
But there's an even bigger catalyst on the way.
The events that allowed Penn National to buy Barstool in the first place are also going to drive this stock to high heaven over the next decade.
Barstool will be its secret weapon...
What's Pumping Penn National Stock
Penn National already owns dozens of brick-and-mortar casinos and hotels around the United States (its best-known property may be the Tropicana in Las Vegas). Now, Penn National plans to develop an online sports betting app, iCasino, as well.
Barstool will play a role in getting traffic to both the casinos and betting platform. Portnoy, who will remain his company's president, has already put out a quirky Barstool ad telling people to invest in Penn National. But the underlying trend driving this stock makes a much more pressing "buy" case.
Online sports betting was legalized by the Supreme Court in 2018. As if scripted, it was just in time for the COVID-19 pandemic, which led to the closure of several casinos around the United States.
Online sports betting would be the go-to for regular gamblers. DraftKings Inc. (NASDAQ: DKNG), for example, popped 285% in 2020 for this reason.
The DraftKings C-Suite were probably glad for a moment that they did not have any brick-and-mortar locations like Penn National.
Penn had to shut down 41 of its properties and lost $608 million in the first quarter of 2020, with negative $5.26 per share in earnings. The same quarter in the previous year saw a profit of $41 million and a profit of $0.35 per share.
Luckily, the company had enough cash on its balance sheet to protect its long-term goals, about $730 million, with an "average cash burn" of $83 million per month through the end of 2020.
The worst could be over, however, now that vaccines are available. States are reopening again, enabling Penn to open locations one by one in 19 different states.
Here's a case where Penn National can have its cake and eat it, too.
The coronavirus prompted a burst in online sports betting. But it wasn't just to hold over on-site gamblers. There is a truly permanent market for online sports betting that we saw only accelerate due to COVID-19.
The only question that remains is whether Penn National can compete with the likes of DraftKings and FanDuel.
Until now, we would have said both these companies had a branding advantage over Penn National. But the Barstool purchase changes that. It's the perfect move to set the company apart.
Barstool already has its own betting app called "Barstool Bets" that offers some quirky, unique bets to separate it from other platforms. In addition, Barstool Sports will funnel an even bigger audience toward iCasino, which already had 40,000 customers sign up in Pennsylvania recently.
The average age of iCasino users is younger than the average casino customer, which is also great news to suggest the company will have exposure to an entire generation on the rise.
Penn National stock is up 56% year to date, from $80 to $125. In the last 12 months, the stock price is up 346%.
Believe it or not, you didn't miss the best gains yet.
The stock's best days lie ahead.
Why Buy Penn National Stock Now?
Online sports betting is expected to nearly reach $200 billion in value by 2030. That will be up from about $50 billion in 2020. That's 150% growth over the next decade.
The online sports betting industry is still sorting itself out to see who is top dog, but owning Barstool sports is a solid edge for Penn.
Let's not forget, this is in addition to the company's widespread brick-and-mortar gambling services. As vaccines roll out, we should start to see more people hit brick-and-mortar casinos in the next two years. That's nice gains even sooner for today's investor as we wait for the online gambling renaissance.
Right now, Penn National stock trades at $124 per share, below its 52-week high of $129. Analysts expect it to hit $150 over the next 12 months, which would be a solid 20% gain from today's price.
This is a major stock to buy if you are looking to get a hand in the budding online sports betting industry. If you want a piece of Barstool sports stock, all the better - stock prices have never been so sensitive to brands, and few brands are influential as Portnoy's Barstool right now.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.