Penn National Casino Business Is Undervalued, Says Analyst

Off the coronavirus market merchant ship inwards March 2020, and late into the number one canton of 2021, Penn National Gaming (NASDAQ:PENN) was 1 of the best-performing house servant equities of any stripe. Enthusiasm for online casinos and sports wagering was a prominent understanding wherefore the stockpile soared.

That brilliancy is now gone, with William Penn tumbling 69.31 percent from its 52-week high. But at least 1 analyst sees benefits in the online sports betting premium essentially existence erased from the stock. In a story to clients, Stifel psychoanalyst Steven Wieczynski notes Penn’s brick-and-mortar gambling casino operations, which investors glossed over patch focusing on net gaming, at present come along undervalued.

The psychoanalyst and his team up ran physical exertion modeling extremely conservativist assumptions around Penn’s land-based gambling casino operations, piece removing all value from iGaming and sports wagering from the equation. They discovered that the operator’s traditional gaming assets are attractively valued.

What we realized is, even out after taking into accounting real conservativist assumptions crossways their brick and trench mortar business and essentially removing all the value around their sports betting/iGaming businesses, we ease reckon considerable economic value at stream levels,” said Wieczynski.

The psychoanalyst rates William Penn a “buy,” but trimmed his terms butt to $59 from $73. The new calculate implies almost 39 percent upside from the Jan. 18 close.

Penn Faces Headwinds, But Stock Is Inexpensive

Following a unsmooth 2021 inward which it disadvantageously trailed the S&P 500 and ranked as ane of the worst-performing equities, William Penn entered 2022 with some support inwards the investment community. But it’s also endured multiple cost direct reductions from analysts since the starting of the year.

Much of the apprehension surrounding William Penn buy in stems from securities industry participants adjusting expectations for sports wagering, and a growing disdain for operators that are losing money inwards the space. As the house servant sports wagering landscape painting evolves, it’s becoming crystalize operators human face big capital expenditures to pull in customers, and Wall Street is progressively prioritizing profitability.

For its part, William Penn isn’t disbursal heavily on marketing, opting to purchase the Barstool Sports brand to lure unexampled sports bettors into the fold. Additionally, as the largest regional gambling casino operator, William Penn has avenues for generating immediate payment and offsetting weakness inwards cyberspace gaming.

“In our opinion, electric current trading levels ascribe nought economic value for PENN’s online sports betting/iGaming long-term opportunities,” adds Wieczynski. “We actually same this, given our disconfirming survey around the long-term prospects for OSB/iGaming, and we imagine investors are eventually starting to infer the headwinds that are sledding to be inward come out for some time around these businesses. We continue to nidus on PENN’s core brick and mortar concern and believe investors should ut the same.”

Too Interesting to Ignore

The Stifel psychoanalyst says Penn’s land-based casino stage business is worth $50 to $55 a share. At $52.50 — the midpoint of that run — that implies the inventory is worth nearly 22 percent more than where it shut today.

Any upside derived from the company’s iGaming/sports betting operations would follow icing the puck on that cake, indicating that business organisation is essentially a phone call alternative added to the broader Penn stockpile thesis.

“The risk/reward at current levels is too compelling to overtake up, in our opinion,” observes Wieczynski. “While the near-term could be choppy until estimates acquire revised take down and root finisher to us, we wait as we make a motion into the midriff of the twelvemonth and gambling casino prop visitation and spend levels remain elevated, investors will start to revisit the PENN story.”

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