Penn National Forecasts Q3 EBITDAR Above Estimates, Notes Boffo Bartsool Results

Posted on: September 29, 2020, 05:18h. 

Last updated on: September 29, 2020, 05:47h.

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

Penn National Gaming (NASDAQ:PENN) told investors late Tuesday third-quarter earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) and revenue will easily top estimates. The company highlighted another strong week of performance by the recently launched Barstool Sportsbook app.

Jay Snowden
Penn National CEO Jay Snowden, seen here in a CNBC interview earlier in 2020, delivered big forecasts for his company today. (Image: CNBC)

In an investor presentation, the operator of Hollywood casinos, among others, forecast EBITDAR of $410 million to $450 million for the current quarter, crushing the Wall Street consensus estimate of $324 million. The gaming company projects turnover of $1.04 billion to $1.14 billion, ahead of the average analyst forecasting of $1.01 billion.

We are extremely pleased with the operating performance of our properties this quarter, despite continued occupancy restrictions,” said CEO Jay Snowden in a statement.

Penn operates 41 gaming properties across 19 states, including the M Resort and Tropicana in Las Vegas, the latter of which recently reopened. One of the reasons analysts are fond of Penn National stock is the company’s deep portfolio of regional venues, meaning reduced dependence on Sin City as a driver of top and bottom line growth.

The firm is obliging that faith, noting that as of Sept. 21, revenue at reopened properties dipped 11 percent year-over-year, but EBITDAR surged 18 percent, while margins soared 1,020 basis points.

Of Course, Barstool

The other reason Wall Street is enthusiastic about Penn stock is the company’s tie-up with Barstool Sports, including the aforementioned sports wagering platform bearing the media property’s name.

Barstool Sportsbook debuted in Pennsylvania last week, trouncing app download marks previously held by rivals DraftKings and FanDuel. In its first weekend, the app generated a handle of $11 million. Snowden said that figure increased 14 percent last weekend. For investors, the more impressive data point may be that Penn has yet to spend any money on external marketing for the app.

Online sports betting is where the cache and superior margins are at. But Penn is leveraging the Barstool brand on the retail front, too. In its investor presentation, the company said Barstool sportsbooks are currently under construction at four of its land-based casinos, and that all of its “major” brick-and-mortar books will bear that branding by the end of 2021.

Fantastic Forecasts

Assuming Penn becomes the outright owner of Barstool, which it has the rights to do, it will spend $450 million for the privilege. When the operator doled out $163 million for 36 percent of the sports blog earlier this year, the outlay was initially criticized in some circles. But now, analysts are mostly keen on the move.

More importantly, Penn sees the combination paying off as it builds internet casinos and sports betting market share. The company said that it can command a 13 percent slice of those industries by 2025 if it can convert six percent of both the Barstool audience of 66 million and its five million active mychoice members.

If that conversion rate hits nine percent, Penn estimates it would have a 19 percent share in the iGaming and sports betting arenas, with a projected value of $5.9 billion.