✈️Barstool Athletics Inc?!

PLUS: Portfolio Moves, Portfolio News, Hilarious GIFS, and much more!

👋Welcome!

What is up Cruisers? We are back!

Not in the mood to read? Check out the recording below of CEO Alan reading the newsletter! Some say he even sounds like Vin Diesel!

🎧To listen on Anchor CLICK HERE!

What is Inside?

  • 🔍Spotlight: $PENN | 💸Portfolio Update

  • 🕺Portfolio Moves| 📰Portfolio News

  • 😂Meme of the Week| 🎮Trivia Night!

  • 📕 Chart of The Week | 🎙️Final Thoughts


🔍Spotlight: $PENN

👋Introduction:

When you look at some of the greatest homerun investments of all time, there is a common characteristic- all of them have many different businesses within the corporation generating significant income. If you take a look at Amazon, the company has many different companies within the corporation including: Amazon Fulfillment, Amazon Web Services, Twitch, Zappos, and so many more. (Yes! Amazon owns Zappos and Twitch, if you did not know!).

**High School Sports Side Note**- if you finally happen to hit your first homerun on senior night in high school baseball, after four years on the team, make sure to still run the bases at a solid speed. You do not want one of your teammates telling you by the time you got home “no one cared since it took so long”. I might be speaking from experience.

Back to investment homeruns! Creating a new stream of revenue for your business can be very difficult. For one of our Portfolio Picks, it is not. It is actually quite easy and it sometimes even falls right into their lap.

Last week, the NCAA (finally) gave athletes the right to earn money off of their brand, image, and likeness (aka- they can do endorsement deals). Adelaide Halverson, a volleyball player from Jacksonville State University, reached out to Barstool Sports (owned by $PENN) to be their first Official D1 Brand Ambassador. Barstool Sports said yes and what occurred afterwards was, in the words of Barstool Sports founder Dave Portnoy, “the most Barstool thing ever”- (going absolutely viral for something that they totally didn’t mean to do).

Thousands of college athletes reached out to the company to become Official Brand Ambassadors. And just like that, Barstool Sports has a marketing agency and a new silo (fancy word, Alan) of business. What a company. What a brand.

We definitely want a piece of a company that makes earning money and finding new areas of business this easy! Now, time for some analysis!

🖼️First Quarter Earnings

This past week, Cruising Altitude made the move of increasing our holdings in Penn National Gaming $PENN. Today, we look forward to telling you just why! One of the main reasons we are so excited about the company is that they are crushing it, represented by a phenomenal first quarter of earnings:

  • Revenue: $1.275 billion (actual) vs. $1.144 billion (expected)

  • Adjusted EPS (Earnings Per Share): $0.55 (actual) vs. $0.30 (expected)

As you can see, $PENN absolutely crushed it. As the world reopened, people’s pocketbooks did too- both for travel and gambling! Beating Wall Street expectations by over $100 million is a huge feat!

Not only did $PENN crush it from a monetary perspective but CEO Jay Snowden shared some very interesting golden nuggets during the earnings call.

🖼️Golden Nuggets

Here are three golden nuggets from the investor call:

  • Before $PENN rebranded their sportsbook to the Barstool Sportsbook, the company had 23% of sportsbook revenue in Michigan. After the rebrand, the Barstool Sportsbook was responsible for 37% of sportsbook revenue in Michigan.

    • Owning Barstool Sports not only allows the company to, well, own the company, but also rebrand their existing casinos and sportsbooks. As you can see from these statistics, that brand is very very powerful. $PENN is expecting there to be Barstool Sportsbooks in 10 states by the end of 2021!

  • Over 50% of $PENN’s sports betting average monthly users in Michigan have placed a bet on iCasino (online gambling).

    • There are two main revenue streams in online gambling: one is gambling on sports and the other is gambling on classical casino games from your phone, by playing games like poker and black jack. Not only are people downloading the Barstool Sportsbook to gamble on sports, but they are also using it to gamble on games like poker and black jack. This is huge!

  • With a very strong balance sheet, the company is looking to do an acquisition!

    • “There could potentially be something that's international that comes along with that technology approach that could be compelling over the long term. And we're going to continue to look at if there's any other potential sort of widening, broadening of the funnel opportunities as it relates to acquisition, the Barstool partnership has paid in spades for us “ - CEO Jay Snowden

    • First and foremost, if the guys and gals that had the brains to acquire Barstool are looking to do another acquisition, we are intrigued! After that, the company mentioned that there cold be a potential international opportunity. Crushing it in the US is good- Crushing it in the world is better!

Second Quarter?! Already?!

In a rather interesting move, $PENN shared projections for their Q2 earnings and they are, you guessed it, phenomenal. Check them out:

  • Revenue Q2: $1.45 billion (2021) vs. $1.32 billion (2019)

  • EBITDA Q2: $420 million (2021) vs. $316.5 million (2019)

$PENN’s revenue is projected to be 10% higher than 2019 revenue and EBITDA (an important profitability metric) is expected to be 33% higher than 2019. Penn National Gaming absolutely crushed it in Q1 and it looks like the good vibes (and good money) are going to keep rolling into Q2.

**Bonus Analysis**

  • If you annualize $PENN’S Q2 EBITDA, the company is trading at a 7x multiple. (#Cheap)

If that one line confused you, do not worry about it! We will cover this fun stuff at a future date.

🎁Wrapping It Up!

For many reasons, we think Penn National Gaming is a phenomenal company. We can list a dozen reasons, but we decided to choose just four for the wrap up:

  • They have had an awesome first half of 2021

  • Barstool Sports is an ELITE asset

  • CEO Jay Snowden and his management team are phenomenal

  • The thematic of gambling is just getting started

$PENN to the moon!

-Alan


💸Portfolio Update:


🕺Portfolio Moves:

These past two weeks, Cruising Altitude has made a couple of moves in our portfolio:

  1. Sold 1 unit in Fastly

    • We are very excited about Fastly’s future prospects; however, we felt that a 15% position in our portfolio was a little too much. Fastly has very complicated technology that the CA team has worked hard at understanding and have a solid grip on. However, we feel more comfortable having these units in something that is a little less complicated!

    • We sold $FSLY at $60.89 and now have 1.5 units remaining. This sale represents a -2.8% return on our average cost position. (We are not recognizing this loss in our portfolio as we do not recognize small percentage gains or losses. And anyway, we had a few positive percentage points leftover from the last trades!)

  2. Bought half a unit in Penn National Gaming

    • After reading today’s newsletter, it is quite clear why we are so excited about $PENN

    • The new position was opened at $75.83 and we now have 2.5 units of the company in our portfolio. The half position remaining from our transactions will remain in cash because it is always good to have some cash!


📰Portfolio News:

  • 😗A Fast Kiss(ling)!- Portfolio Pick Fastly, announced the hiring of their new CFO Ron Kisling. Kisling has quite an impressive resume and was most recently the CFO at FitBit (owned by Google). Takeover rumors are rapidly swirling around the company as Kisling has a track record of coming to new companies, and within a couple of years, leading them to a buyout! Stay tuned!

  • 🖱️Keep on Clicking! Reports surfaced that ViacomCBS, #1 Portfolio Pick, demanded and received the highest market rates for advertisements from advertisers for next year’s ad cycle! Most networks saw advertising increase by 16%-22% while $VIAC received 20%-25%! This is (obviously) a very good sign for the company and one that should have a tangible impact on the company’s financials!

  • 🍀Lucky Number 20! Penn National Gaming $PENN announced on July 1 that they completed the (previously announced) acquisition of operations for the Hollywood Casino in Perryville, Maryland for $31.1 million in cash. This acquisition marks the 20th state in which that Penn National Gaming now owns operations. Watch out for the Barstool Sportsbook launch in Maryland, by this fall!


🤣Meme Of The Week:

Meme Background:

Just a few days ago, Jeff Bezos, Founder and long time CEO of Amazon, officially stepped back from leading the company which he took from absolutely nothing, to arguably the most powerful company in the world.

Andy Jassy, most recently the CEO at Amazon Web Services, will be his replacement!


🎮Trivia Night!

A question you shouldn't know the answer to but will serve as a fun way to learn more about the portfolio picks or the Spotlight company.

Question:

Which one of these Dave Portnoy facts are not true?

A. He has been married before

B. He is 44

C. He is from Boston

D. He is the CEO of Barstool Sports

Answer: D. Dave Portnoy is in fact not the CEO of Barstool Sports! He handed off those responsibilities to Erika Nardini a couple years back! And yes. A, B, and C were all true!


📕Chart of The Week:

Check out this chart below on Pokemon GO- yes. That Pokemon Go:

Okay- This chart shocked us. How could Pokemon GO be doing record sales when you do not hear about it anywhere! Here is the main lesson that Cruising Altitude is taking away from this:

  • Just because something is no longer in the mainstream media does not mean that it can not be huge! Always look one step deeper and do your own analysis!


💭Final Thought:

Today’s Final Thought is brought to you by the great Brian Feroldi! Brian is a Finance Twitter celebrity and filled with investing wisdom!

One of the hardest things to do in investing is not panic when things are down. Assuming that your investment thesis is still strong, and you did your due diligence, it is important to stay calm and not panic!


✈️Thanks for Cruising with us! Follow us on Twitter and subscribe to get the newsletter delivered straight to your inbox!
- Alan & The Cruising Altitude Team

Disclaimer: Cruising Altitude (CA) is not a professional financial service. All materials released from Cruising Altitude are for educational and entertainment purposes. CA is not a replacement for a professional's opinion. Members of Cruising Altitude might have positions in the equities in the Cruising Altitude Portfolio or mentioned in the newsletter.