Penn National Gaming, Inc. (PENN) owns and manages gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. The company conducts business through its various properties across the country. It also operates in the retail sports betting industry through its interactive division, Penn Interactive.

New York Governor Andrew Cuomo released a statement on January 6 supporting the sports betting market. He emphasized how legalizing online sports betting can help generate millions of dollars in tax revenue amid the COVID-19 crisis. PENN has gained 8.3% following the news release.

Because the company continues to respond to new volumes, offerings, and ongoing restrictions with resilience and strong corporate management, it is likely to reach new highs soon.

PENN has been continuously growing its audience through aggressive advertising spending. This has helped the stock gain 230.8% over the past year. This impressive performance combined with several other factors has helped PENN earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates PENN:

Trade Grade: B

PENN is currently trading above its 50-day and 200-day moving averages of $80.91 and $59.54, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 205.9% gains over the past six months reflect solid short-term bullishness.

PENN’s operating income has increased 9.1% year-over-year to $196.20 million in the third quarter ended September 30, 2020. Its adjusted EBITDA has increased 10.3% from the year-ago value to $343.60 million, while its EPS rose 144.7% from the same period last year to $ 0.93.

On December 23, PENN announced its plan to open its rebranded Barstool Sportsbook at Greektown Casino Hotel, Hollywood Casino, Lawrenceburg, and Ameristar East Chicago Casino & Hotel. The rebranded sportsbook is expected to provide an outstanding sports wagering experience to customers, thereby driving the demand.

PENN entered a definitive agreement with Gaming and Leisure Properties, Inc. (GLPI) in December to acquire the operations of Hollywood Casino Perryville for $31.10 million, and to lease associated real estate assets. This agreement will allow the company to expand its foothold nationwide.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , PENN is well-positioned. The stock is currently trading 11.8% below its 52-week high of $99.24.

The company’s net revenue has grown at a CAGR of 7.9% over the past three years. This can be attributed to the company’s diversified revenue mix of advertising, brand licensing, and merchandising, and to its Barstool brand that has helped in acquiring new customers at attractive economics.

Peer Grade: C

PENN is currently ranked #9 of 31 stocks in the Entertainment – Casinos/Gambling Industry. Other popular stocks in this industry are DraftKings Inc. (DKNG), Las Vegas Sands Corp. (LVS) and Caesars Entertainment Corporation (CZR).

While DKNG beat PENN by gaining 356.6% over the past year, CZR gained 31.6%. LVS, in contrast,  declined 17.1% over this period.

Industry Rank: C

The Entertainment – Casinos/ Gambling Industry is ranked #76 of the 123 StockNews.com industries. The companies in this industry are focused on providing casino-entertainment and hospitality services in the U.S. and internationally.

Casinos all worldwide  have experienced a significant decline in visitors, which is set to decline further as COVID-19  continues to spread. Despite the easing of restrictions, major gaming companies have not witnessed significant improvement in their performance because of capacity constraints and  caution about the spread of the virus. However, government initiatives regarding the legalization of sports betting are offering lucrative opportunities to numerous sports organizations and should increase investments in the industry.

Overall POWR Rating: B (Buy)

PENN is rated “Buy” due to its impressive past performance and solid short- and long-term bullishness, as determined by the four components of our overall POWR Rating.

Bottom Line

Despite soaring more than 690% over the past nine months, PENN has the potential to grow further based on its continued business growth, favorable earnings, and revenue outlook.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for PENN. It has an average broker rating of 1.68, indicating favorable analyst sentiment. Of 16 Wall Street analysts that rated the stock, 2 rated it “Strong Buy.” Analysts expect PENN’s revenues to rise 35.2% to $4.95 billion in the current year ending December 31, 2021. The consensus EPS estimate of $1.60 for the current year represents a 132.7% rise from the previous year. The company has an impressive earnings surprise history, as it beat the Street EPS estimates in three out of trailing four quarters. This outlook should keep PENN’s price momentum alive in the near term.

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PENN shares fell $0.25 (-0.27%) in after-hours trading Friday. Year-to-date, PENN has gained 8.54%, versus a 1.96% rise in the benchmark S&P 500 index during the same period.

About the Author: Rishab Dugar

Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...

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