Penn National Gaming Tops $100, Market Cap Bigger Than MGM

Posted on: January 11, 2021, 03:56h. 

Last updated on: January 11, 2021, 04:33h.

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

Boosted by speculation on the fate of online sports betting in New York and a strong weekend handle on NFL games, Penn National Gaming (NASDAQ: PENN) surged seven percent Monday on volume that was more than 50 percent above the daily average.

Penn stock
The Barstool Sportsbook at Penn National’s Ameristar Casino in Colorado. The stock hit $100 today. (Image: Denver Westword)

In the process, Penn stock closed above $100 for the first time, joining Wynn Resorts (NASDAQ:WYNN) as the only domestic gaming equities with triple-digit price tags. The Barstool Sportsbook operator finished today with a market capitalization of $15.59 billion, inching ahead of MGM Resorts International (NYSE:MGM) by that metric. Penn is now the third-largest US-based casino company by market value, trailing only Las Vegas Sands (NYSE:LVS) and Caesars Entertainment (NASDAQ:CZR).

In less than 10 months, Penn went from trading below $4 to over $100, confirming some analysts’ view that the January 2020 purchase of a 36 percent stake in David Portnoy’s Barstool Sports for $163 million awakened a sleeping giant.

This is really a testament to the quality of the Barstool Sports acquisition by Penn,” said Roundhill Investments analyst Matias Dorta in an interview. “When Penn announced the Barstool acquisition in January 2020, the company’s prospects changed overnight. Once a little-known but profitable regional casino operator, Penn was transformed into a digital media and sports betting powerhouse.”

Adding to the superlatives for Penn stock are its status as the largest component in the Russell 2000 Index and its position as a potential addition to the Nasdaq-100 Index later this year.

Michigan Test Looms

Last September, Penn launched the Barstool Sportsbook app in the gaming company’s home state of Pennsylvania, and that was the lone state where it was available for the last several months of the year.

With essentially no marketing spend by Penn, the app rapidly became a hit, ascending the ranks of the most-trafficked web-based sportsbooks in the Keystone State. Its next test will be Michigan, a large state that’s a newer entrant to the online sports betting fray.

“I believe the next big test for Penn National and Barstool is the Michigan launch of the Barstool Sportsbook app, scheduled for this month once online betting goes live in the state,” said Roundhill’s Dorta. “This is the first time Barstool Sportsbook will be launching at the starting line with their competitors. In Pennsylvania, they launched more than a year after online sports betting went live in the state. It will be interesting to see if Barstool Sportsbook can take a top market share position in Michigan.”

Cult of Personality

While partnerships between gaming and media companies are the norm these days, the stable of influencers Penn gained access to with the Barstool deal is something rival pairings lack.

In fact, Barstool founder Portnoy is, in some circles, viewed as the face of Penn National, although he holds no official executive role at the company.

“Barstool’s slate of influencers from Portnoy to Big Cat to Marty Mush, podcasts such as “Call Her Daddy” and “Pardon My Take” should continue to pay off big for Penn National Gaming. Barstool has created a media empire and it is proving to be an extremely valuable asset for Penn,” said Dorta.