Penn National Extends Torrid Pace, Analyst Tags it with Street High $80 Target

Posted on: September 10, 2020, 09:28h. 

Last updated on: September 10, 2020, 12:35h.

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

Penn National Gaming (NASDAQ:PENN) is extending its winning ways Thursday, trading higher by more than nine percent. That’s after Rosenblatt Securities analyst Bernie McTernan commenced coverage of the stock with a “buy” rating and an $80 price forecast.

David Portnoy Penn Stock
Barstool Sports founder David Portnoy, seen here in a 2019 interview, is a big reason Wall Street loves Penn National stock. (Image: HBO)

The analyst’s $80 estimate is the highest on Wall Street and implies upside of roughly 40 percent from the Sept. 9 close. McTernan’s call arrives just nine days after research firm Craig-Hallum put a $75 target on Penn, which, at that time, was the highest call on the name.

McTernan sees the combination of Penn’s regional casinos and its relationship with Barstool Sports as alluring for investors.

With a unique, content-focused strategy, we believe PENN has the opportunity to gain significant share in the online sports betting market at above peer margins, driven by their Barstool partnership and physical footprint,” said the Rosenblatt analyst.

Today’s pop in Penn stock is happening on the volume that nearly matched the daily average less than three hours into the trading day. This extends a run where the name is higher by more than 85 percent over the past 90 days and up almost 1,600 percent from its March lows.

Barstool, of Course

Gaming equities are broadly higher today. But those with sports betting exposure, such as Penn, are outperforming due in part to the start of the 2020 NFL Season tonight.

Penn stock is recently gaining the favor of sell-side analysts, with some highlighting the imminent debut of the Barstool Sportsbook betting application. Earlier this week, the casino operator said it’s soft-launching that wagering platform in Pennsylvania and hopes to take it live across the state next week.

The app is viewed as a foundation for the operator’s digital-first future, and McTernan sees an opportunity for Penn to be a force in the US sports wagering market.

“As sports betting moves from niche to mainstream, we believe Barstool can take advantage of this greenfield opportunity to be the dominant sports betting media company in the US,” said the Rosenblatt analyst.

In January, Penn paid $163 million in cash and equity to acquire 36 percent of Barstool Sports. The gaming company can eventually own the sports media property outright for $450 million. Under the terms of the deal, Penn’s brick-and-mortar and online sportsbook will bear the Barstool brand, while the media property will promote the operator’s land-based and interactive gaming offerings for 40 years.

‘Content Is King’

Penn’s move touched off a wave of media/sports betting partnerships. But Wall Street views the Barstool relationship as one of the more compelling in the group because of the blog’s devoted, younger fan base, making for fertile territory finding tech-savvy gamblers.

“Similar to our thoughts on the traditional media industry, we believe content is king and should provide PENN with the opportunity to gain significant share,” said McTernan. “If PENN can leverage Barstool’s brand with a best-in-class and differentiated app, we believe there is potential for PENN to be the market leader.”

The analyst says his base case scenario is Penn gaining 15 percent market share in regions it launches Barstool Sportsbook, leveraging its physical properties and “the engaged Barstool audience.”