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This article was originally published on December 16, 2020, on stocknews.com. It has been reposted here, with permission.
Penn National Gaming, Inc. owns and manages casinos and racetracks through four segments — Northeast, South, West, and Midwest. The company operates an online casino under the name of iCasino in Pennsylvania. Despite significant capacity restrictions in many of its properties due to the coronavirus pandemic, the company has successfully generated substantial capital and increased its cash holdings in the third quarter.
PENN, which is currently trading at $83.09, could hit$100 in 2021 with the launch of its Barstool App. This app is well suited for online gambling and could represent a new growth channel for the company.
PENN’s robust platform and its cash on hand and flexibility to invest in high-growth opportunities have allowed it to gain 232.8% over the past year. This impressive performance, combined with other factors, has helped PENN earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates PENN:
Trade Grade: A
PENN is currently trading above its 50-day and 200-day moving averages of $66.96 and $42.18, respectively, indicating that the stock is in an uptrend. Also, the stock has gained 21.8% over the past three months, reflecting solid short-term bullishness.
PENN’s “Other” segment revenue has increased 91.1% year-over-year to $23.70 million in the third quarter ended September 30, 2020. Its net income grew 223.2% from the year-ago value to $141.20 million, while EPS rose 168.4% year-over-year to $1.02. Adjusted EBITDA increased 11% from the prior-year quarter to $452.60 million over this period.
On December 15, the company announced a definitive agreement with Gaming and Leisure Properties for the acquisition of Hollywood Casino Perryville in Maryland for $31.10 million. This will allow PENN to enter the strong Maryland gaming market and expand its omni-channel platform.
PENN recently launched its Barstool Sportsbook app in Pennsylvania, which broke records for the most downloads ever for the launch of a new mobile sportsbook. The launch should help the company increase its market share in the high-growth sports betting industry.
Buy & Hold Grade: A
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 just 1.7% below its 52-week high of $84.49, which it hit on December 14.
The company’s net revenue grew at a CAGR of 7.9% over the past three years. This can be attributed to the company’s growing market for Barstool Sports and active promotion of its retail and online sports betting offerings.
Peer Grade: A
PENN is currently ranked #2 of 22 stocks in the Entertainment – Casinos/Gambling group. Other popular stocks in this group are Caesars Entertainment Corporation., Boyd Gaming Corporation and Scientific Games Corp.
CZR, BYD, and SGMS gained 37.1%, 43.5%, and 46.3% over the past year, respectively. This compares to PENN’s 232.8% returns over this period.
Industry Rank: C
The Entertainment – Casinos/Gambling group is ranked #64 of the 123 StockNews.com industries. The companies in this industry offer casino-entertainment and hospitality services in the United States and internationally.
The closure of entertainment centers and casinos, and the abrupt cessation of economic activity due to lockdowns imposed earlier this year negatively impacted the revenues and profitability of companies in this industry. Because the economy is reopening only gradually, online casinos might also face a decline in users.
Overall POWR Rating: A (Strong Buy)
PENN is rated “Strong Buy” due to its impressive financials, short- and long-term bullishness, and solid price momentum, as determined by the four components of our overall POWR Rating.
PENN is well positioned to reach the $100 mark in the upcoming months despite gaining 232.8% over the past year. As gamblers increase their spending on online casinos and entertainment amid a second wave of the pandemic, the stock will move higher.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is impressive for PENN. It has an average broker rating of 1.68, indicating favorable analyst sentiment. The consensus EPS estimate of $0.31 for the next quarter ending March 31, 2021 indicates a 105.9% improvement year-over-year. Moreover, PENN has an impressive earnings surprise history, with the company beating consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $1.17 billion for the next quarter indicates a 4.8% increase from the same period last year.
PENN shares rose $0.52 (+0.59%) in after-hours trading Wednesday. Year-to-date, PENN has gained 247.14%, versus a 16.64% rise in the benchmark S&P 500 index during the same period.