Penn National Gaming Price Target Pared, But Analyst Sees Fears Priced In

Posted on: February 1, 2022, 10:35h. 

Last updated on: February 1, 2022, 01:00h.

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

Penn National Gaming (NASDAQ:PENN) is trading higher today despite an analyst dramatically reducing his price target on the regional casino operator.

Penn price target
Penn National’s Ameristar casino in Missouri, seen above. An analyst lowered his price target on the stock, but still sees upside. (Image: KSDK)

In a note to clients, Credit Suisse analyst Benjamin Chaiken reiterates an “outperform” rating on Penn, while paring his price forecast on the stock to $99 from $128. Although $99 is a far cry from $128, Chaiken’s new outlook on Penn is still more than double where the shares reside today, and well above the Wall Street consensus of $71.

Analysts’ price targets on Penn are trending lower to start 2022 after the stock was one of the worst performers among gaming equities last year. But there are signs of hope.

While November saw weaker results across the board (which in our view has driven some of the weakness in the stock), December recovered, with revenues up ~mid-single digit vs. November,” says Chaiken.

Pennsylvania-based Penn operates 44 casinos in 20 states.

Penn Could Perk Up

Penn is the largest regional casino operator — a trait some market participants may have lost sight of in the fervor surrounding online casinos and sportsbooks.

However, its status as a regional gaming behemoth cuts both ways. It was one of the contributing factors to Penn becoming a story stock off the March 2020 coronavirus market bottom. Arguably, it was also a reason why the shares slumped last year, as investors fretted about gaming companies’ ability to continue expanding margins at the pace seen immediately following the onset of the pandemic.

Chaiken says market participants’ concerns about sagging revenue and margin erosion are likely factored into Penn’s share price.

“To this point, we think that concerns around decelerating revenues and deteriorating margins are priced in,” said the analyst.

Signs of Life for Penn Stock

Penn shed 12 percent in January and the stock needs to more than triple to return to the all-time of $142. But there could be green shoots emerging, as the shares are higher by 7.57 percent over the past week.

Additionally, there are potential tailwinds lingering for the stock, including the recent launch of sports betting in Louisiana, where Penn is one of the largest casino operators. There’s also news that the iGaming and regulated sports wagering markets in Ontario, Canada will open to private operators in April.

Last August, Penn paid $2 billion in cash and stock to acquire Score Media and Gaming to gain a foothold in the recently liberalized Canadian sports wagering market.

“Launching theScore Bet in Ontario will mark an exciting expansion of our online gaming business into a major new market where we already have an established mobile sports media product in theScore app and a wide base of loyal users,” said Penn President and CEO Jay Snowden in a statement.