Penn Nationwide Shares Rally On Bullish Feedback From Morgan Stanley
Following a brutal stretch that’s seen the inventory shed 59.27% of its worth over the previous yr, Penn Nationwide Gaming (NASDAQ:PENN) is drawing some reward on Wall Avenue.
Penn Nationwide Gaming’s Hollywood On line casino in Maryland. Morgan Stanley is bullish on the inventory. (Picture: The Enterprise Journals)
In a word to purchasers immediately, Morgan Stanley analyst Thomas Allen upgrades shares of the regional on line casino operator to “chubby” from “market weight.” Allen is citing a compelling valuation alternative. Whereas Allen lowers his value goal on Penn to $51 from $56, his new projection nonetheless implies upside of 40% from the April 22 shut.
PENN’s current underperformance coupled with higher sports activities betting efficiency presents a chance,” writes Allen. “Whereas PENN’s underperformance was considerably warranted given extra blended current earnings outcomes and declining sports activities betting market share in key states like Michigan, Pennsylvania and Illinois, we’ve seen sports activities betting share stabilize within the US.”
Sports activities wagering was a catalyst for an enormous run-up in Penn inventory following the coronavirus market backside in March 2020. That script flipped final yr because the funding neighborhood utilized extra scrutiny to powerful economics of the home sports activities wagering trade.
There are, nonetheless, some vivid spots, as Penn’s theScore Guess unit is off to a stable begin in Ontario, Canada, and Allen factors out the operator’s Barstool Sportsbook model within the US continues gaining clients.
Penn Nationwide Appears to be like Low-cost
Just because the inventory is down 29.51% year-to-date doesn’t make Penn cheap. However different information factors point out there’s worth available with shares.
“After important underperformance, inventory is buying and selling at simply 5.7x our 2023e earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) for its core on line casino enterprise, vs. 7.5x long-term common, in case you assume its sports activities betting/iGaming enterprise takes 6.75% NA share on an 11x a number of,” provides Allen.
The analyst estimates that Penn’s margins look conservative and that the operator’s mini-casinos in its house state of Pennsylvania are topping expectations. Citing not too long ago reported state-level information, Allen sees a chance for the gaming firm to beat first-quarter forecasts.
“Whereas one quarter doesn’t make a pattern, the 1Q energy from plenty of properties leads us to imagine PENN is in a comparatively good place to hit 2022 expectations, probably extra so than Boyd Gaming (NYSE:BYD), the place regional properties the place states have reported had been 1% under our prior 1Q expectations,” provides the Morgan Stanley analyst.
Allen Lowers Targets on Slew of Different On line casino Names
Talking of Boyd Gaming, Allen downgraded that regional on line casino operator to “equal weight” from “chubby”, citing the inventory’s relative outperforming friends this yr. He says Penn affords extra engaging threat/reward traits.
Las Vegas-based Boyd runs 28 gaming venues throughout 10 states, together with 11 in its house metropolis.
Boyd wasn’t alone in incurring some detrimental commentary from Allen. Citing rising rates of interest, amongst different elements, the analyst pared value targets on Caesars Leisure (NASDAQ:CZR), Las Vegas Sands (NYSE:LVS), MGM Resorts Worldwide (NYSE:MGM), and Wynn Resorts (NASDAQ:WYNN).
