Penn National Q4 Results Impressed, But Analyst Has Reservations

Shares of William Penn National Gaming (NASDAQ:PENN) gained 1.79 percent finally week. That’s after the regional casino hulk posted fourth-quarter results that topped Wall Street estimates. But at least I analyst is taking a conservative attack to the downtrodden stock.

In a remark to clients in conclusion Friday, Philip Roth Washington analyst Edward VII Engel lowered his rating on William Penn to “neutral” and his cost point to $51, citing the potentiality for 2022 headwinds to emerge.

We downgrade PENN to Neutral, part inwards response to 4Q21 results offering a less attractive 2022 outlook. While we remain bullish on PENN’s digital opportunity longer-term, we see several negatively charged catalysts inwards 2022 that could gnaw at confidence inwards its market portion out trajectory,” said the analyst.

When Penn delivered results for the finally trey months of 2021 finally Thursday, the buy in rallied after the manipulator said its digital gaming unit, including Barstool Sportsbook, performed ameliorate than expected. That enterprsise missed $6 jillion on revenue of $150 jillion inwards the Oct through and through Dec 2021 period, while analysts calculate a deprivation of $20 zillion on sales of $114 million. This year, Penn’s digital operations are expected to lose $50 million, well-below prior counseling calling for a loss of $80 million.

Devil’s inward Guidance Details

Penn offered upward 2022 guidance, locution it expects meshing revenue of $6.07 one million million to $6.39 billion. That’s on earnings before interest, taxes, depreciation, amortization, and restructuring or split costs (EBITDAR) of $1.85 one million million to $1.95 billion.

That’s a decent outlook, and some analysts contend fears most faltering revenue and perimeter eating away are mostly factored into Penn’s stock up price. But Engel notes it will be tricky to hold margins becalm as inflation soars. He also mentions some potential market-specific issues Penn could coming upon as 2022 unfolds.

“While gentle 1Q comps offset a difficult 2Q, we view downside risks from incremental cannibalization at quaternion properties next yr (Bossier, Lake Charles, Council Bluffs and eastern United States Chicago),” adds the analyst.

Penn, the largest regional gambling casino operator inward the US, derives material portions of its revenue from LA and the Midwest.

Cautious on William Penn Canada Opportunity, Too

Last August, Penn doled out $2 billion in hard cash and equity to win Score Media and Gaming to realise a foothold inward Canada, as that land legalized single-game sports wagering. Ontario, the country’s most thickly settled province, is slated to opened the marketplace to private companies inward April.

While that could follow a prescribed for Penn, at that place are substantial militant threats inwards the forms of Bet365, Entain, and Flutter, which are already operating in Canada’s grey market.

“These operators tin can also rationalize greater marketing spend, precondition surmount benefits from grey securities industry trading operations in contiguous provinces,” notes Engel.

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