Penn Entertainment Shares Could Resume Winning Ways

Posted on: August 28, 2022, 05:02h. 

Last updated on: August 29, 2022, 01:04h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Penn Entertainment’s (NASDAQ:PENN) stock is off 38% year-to-date, a decline far worse than that of the MVIS Global Gaming Index. But some market observers believe shares of the casino giant offer rebound potential.

Penn stock
Penn Entertainment CEO Jay Snowden, seen in a publicity photo above. Some market observers believe the stock is poised for gains. (Image: Bloomberg)

The Pennsylvania-based company is the largest regional casino operator in the US and does not run land-based gaming properties outside this country. That’s a plus at a time when the dollar is strong, and some competitors are grappling with ongoing COVID-19 protocols in Macau.

Formerly known as Penn National Gaming, the company runs 44 casinos in 20 states. Additionally, Penn’s second-quarter results and full-year outlook are attractive.

Revenues grew 5.4% year-over-year (YoY) to $1.63 billion beating consensus estimates for $1.61 billion. PENN reaffirmed its full-year 2022 revenue guidance of $6.15 billion to $6.55 billion versus $6.36 billion consensus analyst estimates,” noted Schaeffer’s Investment Research.

Conversely, a sagging stock market, rising interest rates, and inflation that shows no sign of cooling over the near term are among the factors analysts and economists see weighing on consumer confidence and spending. That’s potentially ominous for casino operators, the epitomes of cyclical consumer names.

Penn Interactive, a Rising Force

Penn Interactive, the company’s online gaming unit, is ascending and stands as another possible catalyst for the stock.

On a related note, the company announced earlier this month that it’s exercising rights to acquire the percentage of Barstool Sports it didn’t previously own. That means it will own all of David Portnoy’s media entity when the transaction wraps up in February.

Barstool Sportsbook hasn’t yet reached the heights of FanDuel or DraftKings. But the Penn online sportsbook is leveraging Portnoy and other Barstool personalities to acquire younger customers cost-effectively — a meaningful trait, as some rivals spend heavily on marketing.

“The combination of physical locations and online interactive gambling enables a synergistic network effect where customers can gain comps and prizes while staying connected to the brand from virtually anywhere,” Schaeffer’s. added.“PENN is able to reach, or rather PENN’s customers are able to reach them in multiple channels in a cashless, cardless, and contact-less manner.”

Massachusetts Could Power Penn Stock

The recent legalization of sports wagering in Massachusetts, where Penn operates the slots–only Plainridge Park Casino (PPC), could be another catalyst for the stock over the long term.

“There will be six mobile betting licenses, and Penn is very likely to claim one. It currently has a horse racing and slot machine parlor in Plainview, Massachusetts, that can benefit from the addition of a sportsbook. Additionally, their Bar Stool Sports app originated in Boston, making it very popular for the college and millennial crowd,” Schaeffer’s concluded.

Eighteen analysts cover Penn Entertainment stock, with 13 rating the shares “strong buy” or “buy.” The average price target on the gaming equity is $50.24, implying a significant upside from the Aug. 26 close of $32.18.