Bank of America Bullish on Barstool App, Lifts Penn National Target to $85

Posted on: September 21, 2020, 11:48h. 

Last updated on: September 21, 2020, 12:08h.

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

Penn National Gaming’s (NASDAQ:PENN) first test of its relationship with Barstool Sports, that being the Barstool Sportsbook mobile application, appears to be going well. Wall Street is taking note.

Barstool sportsbook
Barstool Sports founder David Portnoy, seen here at Saratoga Racecourse in 2015, apparently had plenty to cheer about this weekend with the debut of the Barstool Sportsbook app in Pennsylvania. (Image: YouTube)

The gaming company launched the highly anticipated sports wagering app across its home state of Pennsylvania last Friday – just in time to capture a weekend chock full of NBA, NCAA football, NFL, and U.S. Open action. It’s just one weekend in one state, but some Wall Street analysts are enthusiastic about the initial reaction to Barstool Sportsbook.

Although data is limited, initial metrics are encouraging, as it was the #1 sports betting and overall sports app in the App Store for much of the weekend,” said Bank of America analyst Shaun Kelley in a note to clients today.

Following a three-day soft launch, Barstool Sportsbook became available to gamblers across the Keystone State on Friday. Underscoring demand for sports betting products and the potency of the Pennsylvania market, it was just a matter of hours before the wagering platform was the sixth-most downloaded sports app in the Apple App Store, only trailing the likes of NFL.com, ESPN.com, and a U.S. Open tracking offering.

Still Room to Run for Penn Stock

Penn stock entered Monday with a gain of 29 percent over the past month. But it’s modestly lower today, as investors depart gaming stocks amid fears of another wave of coronavirus cases. Kelley, the Bank of America analyst, remains undaunted in his bull thesis on the name, ratcheting his price target on the shares to $85, a tie for the highest forecast on Wall Street.

“While the stock has had an amazing run, we still like PENN, given its attractive exposure to sports betting/iGaming and an improving core business,” said the analyst.

There could be something to that thesis, because Penn is expected to roll out Barstool Sportsbook in more states over the near-term. Then there’s the possibility of a political push for the stock, particularly if Louisiana voters and Ohio legislators sign off on sports betting before the end of the year. Those states are marquee markets for Penn National.

The operator is expected to roll out the app in other states in the first quarter, leaving it to tussle in Pennsylvania against rivals such as BetRivers, DraftKings and FanDuel, among others, for the remainder of 2020.

Road to $85

When Penn stock sank below $4 in March, a return to $15 or $20 seemed implausible. These days, at least three analysts have price objectives on the name of $80 or higher, including the two aforementioned $85 forecasts.

With Penn now being a momentum name, it’s not hard to make a case it can gain the 23 percent necessary to get to $85.

“Factor in PENN’s leverage, small size, retail base, momentum, and short interest, and it is easier for us to see additional upside. We raise our PO to about 12x EV/EBITDA on 2022E, which on a sum of the parts, implies approximately 8.5x revenue on sports betting/iGaming,” said Kelley.