Is Penn National Gaming a buy?

It’s time to talk about another entertainment name. Here is the breakdown of $PENN, otherwise known as Penn National Gaming.


Current Price: $76.53

52/Wk High: $80.87

52/Wk Low: $3.75


Market Cap: $11.7 billion


Read below for the breakdown!


Penn National Gaming is a major US owner of racetracks, casinos, and is the majority owner of Barstool Sports.


Throughout the past several years $PENN has been attempting a significant push into the sports betting market, which has been mostly successful given the recent legalizations of sports betting across the nation.


Not only that but Penn National Gaming also saw and capitalized on the opportunity to acquire 50% of Barstool Sports for roughly $225 million, valuing Barstool around $450 million.


Digging into the numbers Penn National Gaming delivered a Q3 beat with an EPS of $0.93 versus the EPS consensus estimate of $0.53. Not only did Penn National beat on EPS but also saw plenty of growth under the hood.


Penn National Gaming reported total Q3 revenues of $1.1297 billion, far better than their dismal Q2 revenues number of $306 million. On the flip side, Q3 revenues were still down roughly -16% year over year.


Furthermore, Penn National reported an adjusted EBITDA of $343.6 million and an adjusted EBITDAR of $452.6 million for the third quarter, representing an 11% increase.


Penn National also reported a stronger Q3 net income of $141 million, much better than the net income of Q3 2019, which was $44 million.


Management noted that the weaker and more volatile numbers were in relation to the pandemic and restrictions across the country.


“The current operating environment has demonstrated the resilience of our teams and operations as we’ve made significant modifications to our business model to respond to the new volumes, offerings, and ongoing restrictions,” management said.


While the pandemic has plagued the company in recent months Penn National has managed to launch the Barstool Sportsbook app in Pennsylvania.


The launch broke records and roughly 48,000 people registered with the Sportbook app in Pennsylvania alone. The more impressive factor though was the fact that within just the first 37 days the app generated $78 million throughout 30,000 first-time depositors


Penn National management noted that the company looks forward to launching the sports betting app in even more states.


When it comes to guidance Penn National Gaming did not offer forward-looking expectations.


Shifting into the balance sheet Penn National has some work to do.


Total Debt: $6.772 billion


Total Liabilities: $12.178 billion


Total Assets: $14.812 billion


Cash & Short Term Inv: $1.873 billion


While $PENN has run significantly this year, the valuation is actually not terribly out of hand.


Price to Sales: 2.98x


Price to Book: 4.44x


Price to Cash Flow: 12.63x


On a management performance basis, leadership could definitely improve.


Return on Equity: -33.98%


Return on Assets: -5.32%


Return on Invested Capital: -5.67%


Given the numbers, the analysts remain mostly neutral with the mean price target sitting at $76.73/share, representing a -1.15% downside.


It is also important to note that the high price target is $100.00/share, representing a 28.83% upside, while the low price target is $31.00/share, representing a -60.06% downside.


The big money is also quite involved with 87.30% of Penn National Gaming being owned by institutions. Top holders include Fidelity Management & Research, BlackRock Institutional Trust, and The Vanguard Group.

On a technical basis, $PENN could be flashing opportunity. According to the six-month charts the MACD is trending with sideways momentum within a tight range around 2.58.


The six-month charts are also indicating an RSI of 64.42 and CCI of 137.87, both of which are on the higher end but not to far gone. It is also important to note that $PENN does trade just a few points off its highs.


In short, I believe that Penn National Gaming is a solid long-term pick given the recovery from the pandemic and growth of Barstool Sports.


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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.