Penn Inventory Will get Assist from Analysts Amid Prolonged Slide
Posted on: Might 7, 2021, 07:02h.
Final up to date on: Might 7, 2021, 01:27h.
On Thursday, Penn Nationwide Gaming (NASDAQ:PENN) reported better-than-expected first-quarter outcomes, however the inventory tumbled greater than eight p.c.
That extends a now-lengthy slide that’s seen the regional on line casino operator shed 18 p.c over the previous month and 41 p.c from its March highs. Right this moment, analysts are lining as much as defend Penn inventory, with some saying the sell-off is an excessive amount of, too quickly, and that it may show to be a shopping for alternative.
Morgan Stanley’s Thomas Allen mentioned the Penn slide is “overdone” following what he calls a “sturdy” first-quarter exhibiting. He reiterates an “equal weight” ranking on the shares with a $99 worth goal, implying upside of just about 18 p.c from the Might 6 shut.
Within the first three months of the 12 months, the gaming firm earned 55 cents a share on income of $1.27 billion. Analysts anticipated earnings per share of 28 cents on gross sales of $1.14 billion. Earnings earlier than curiosity, taxes, depreciation, amortization, and restructuring or lease prices (EBITDAR) for the January by March interval was $447 million, simply topping the consensus estimate of $393.9 million.
Encouraging Land-Primarily based Tendencies for Penn Inventory
Throughout its rally and subsequent ascent into the S&P 500, Penn was revered for its nascent iGaming and sports activities betting operations. Nevertheless it’s nonetheless the most important regional on line casino operator within the nation.
Tendencies on that entrance are encouraging. However yesterday’s sell-off within the inventory could have been a case of traders pricing within the results of COVID-19 closures that hampered the corporate’s first-quarter efficiency in Illinois and Pennsylvania, the place gaming venues had been closed for a part of January. Moreover, Penn’s Zia Park in New Mexico didn’t reopen till early March. Nonetheless, analysts like what they see.
Pent-up demand from their brick and mortar clients is spectacular, and has but to totally roll out throughout PENN’s whole portfolio,” mentioned Stifel’s Steven Wieczynski in a be aware to shoppers. “
“Leads to the less-restricted South phase outpaced the broader PENN portfolio and bodes effectively for states nonetheless but to pare again restrictions on casinos to the identical diploma,” Wiezynski continued.
Wieczynski nonetheless charges Penn a “purchase,” however trimmed his worth forecast to $108 from $124, to mirror a extra conservative posture on the corporate’s web casinos publicity and Barstool Sportsbook. The operator is aiming to have the cell betting app dwell in eight states by the beginning of NFL season, and 10 states by the tip of 2021.
Penn Holding Prices in Verify
As is the case with many regional gaming operators, Penn is proving adept at boosting margins towards the COVID-19 backdrop. The corporate estimates long-term margin enlargement will strategy 90 p.c of 2019 income.
Value administration is one other level in favor of Penn inventory, notes Wieczynski.
“PENN’s buyer acquisition prices are well-below market charges, whereas benefits on buyer retention are doubtless underappreciated at this stage of the sport,” mentioned the Stifel analyst. “PENN famous their blended CPA is working beneath $100/buyer, which compares to friends working $300 to $800 right now.”
Whereas traders could also be fretting in regards to the sustainability of Penn’s stellar margin traits, the analyst says he’s assured that Penn administration can run the enterprise in a leaner style at the same time as demand traits return to pre-pandemic type.