Whereas on line casino shares, together with these of some regional operators, are performing admirably in 2023, the alternative is true of Penn Leisure (NASDAQ: PENN).
A slide from a Penn Leisure investor presentation. An analyst says the worst could also be behind the battered inventory. (Picture: Penn Leisure)
Shares of the most important regional on line casino operator are down 11.78% year-to-date whereas rivals together with Boyd Gaming (NYSE: BYD) and Crimson Rock Resorts (NASDAQ: RRR) are up a mean of 24%. Sentiment surrounding Penn is dismal, nevertheless it’s potential it might’t get any worse, probably paving the best way for a mini-rebound by the beleaguered inventory.
In a brand new report back to purchasers, Stifel analyst Steven Wieczynski famous traders could also be pricing in worst case eventualities with Penn inventory that may not materialize.
At this level, we consider traders are pricing in not solely a significant slowdown within the regional gaming client, but additionally successfully zero (if not adverse) credit score for his or her Interactive enterprise,” wrote the analyst.
He has a “maintain” score on the inventory with a $32 value goal, implying potential upside of twenty-two.13% from at present’s shut.
Factors in Favor of Penn
Penn has been beset by a number of headwinds, together with controversies tied to Barstool Sports activities founder David Portnoy and his future on the gaming firm, traders speculating that there’s subsequent to worth within the firm’s digital enterprise and that customers are poised to dial again visits to regional casinos.
The final level is essential as a result of land-based casinos are Penn’s core enterprise. Whereas the operator’s inventory efficiency doesn’t replicate it, different information factors point out visitation to regional casinos stays robust and former fears of a recession look like overblown. The Could jobs report confirms as a lot. These components and extra may spark renewed curiosity in Penn shares — one thing Wieczynski says is going on on an incremental foundation.
“We might additionally spotlight that our name volumes on PENN have elevated materially over the past month, which could possibly be a sign that present buying and selling ranges are lastly beginning to display screen enticing for sure investor teams,” noticed the analyst. “First, looks like there may be little proof that the regional gaming client is pulling again.”
Wieczynski added that one other level in favor of Penn is that the operator is considerably much less depending on decrease earnings patrons — those most probably to scale back spending and visitation throughout a recession — than it has been in years previous. That would point out its shopper base is healthier positioned to climate an financial downturn.
Penn Inventory Is Low-cost
If market contributors aren’t satisfied by the aforementioned components, maybe Penn’s rock-bottom valuation could possibly be interesting.
“Administration nonetheless sees 2023 steerage as conservative ought to present demand ranges stay regular,” concludes Wieczynski. “In the end, we stay drawn to PENN’s FCF era and consider that with an extended sufficient horizon, present buying and selling ranges current a gorgeous entry level. With shares now buying and selling ~6x earnings, we consider it is a identify traders needs to be watching.”
Level is with headwinds already priced into the inventory, Penn could also be too low-cost for some traders to disregard at present ranges.
