Penn Entertainment Has ‘Unrecognized Value,’ Says Analyst
Stocks of Penn Entertainment (NASDAQ: PENN) are experiencing significant volatility, evidenced by a 26% decline year-to-date and a 20.7% increase in the last 90 days — the latter suggesting the possibility of a lasting recovery is present.
Certain analysts continue to hold a positive outlook on the struggling regional casino stock. For instance, Truist Securities analyst Barry Jonas recently engaged with Penn management, leading him to reaffirm a “buy” rating and a $25 price target. That suggests a potential increase of nearly 30% from the current closing price of $19.24.
Recently, the stock has become a battleground due to speculation that the company may be a takeover candidate, especially with an important football season approaching—one that could significantly influence the future of ESPN Bet. These concerns might be diverting attention from what Jonas describes as "largely steady" trends at Penn’s terrestrial casinos, prompting the analyst to note that Penn has "genuine unrecognized value."
Speculation about a takeover of Penn began in late May when the Donerail Group, an investor, wrote to the gaming company's board urging them to consider selling in order to enhance shareholder value. Since that time, analysts have repeatedly stated that such a deal is improbable and it's likely that Penn is not eager to sell.
LaBerge Recruitment Might Be Significant for Penn
As certain industry analysts see the 2024 football seasons as crucial for ESPN Bet, Penn's appointment of ex-Walt Disney (NYSE: DIS) executive Aaron LaBerge as chief technology officer (CTO) might prove beneficial.
"Though he hasn’t worked in the gaming space before, we believe the benefits of his prior experience far outweigh any online sports betting-specific intricacies (which can be learned), especially with strong support at PENN,” wrote Jonas.
During his time at Disney, LaBerge took on key roles in creating the company's mobile applications that are not related to theme parks, which included one for ESPN and another for the sports network’s fantasy sports games.
Jonas noted that as Penn's ESPN Bet seeks to narrow the distance with competitors DraftKings and FanDuel, LaBerge might prove to be a significant asset for the gaming firm, given his experience at Disney in creating technology to tackle competition. Jonas referenced the case of Disney versus Netflix in the realm of streaming entertainment.
Jonas remarked that Netflix “had a 10-year advantage and millions of subscribers, but DIS managed to compete effectively as its product grew more advanced over time.”
Additional ESPN Bet Analysis
Most of Penn’s income and revenue come from its physical casinos, yet ESPN Bet has captured the attention of numerous investors. This makes the intended improvements to the sports betting app by Penn crucial.
Jonas noted that the growth of ESPN Bet is expected to be slow, yet he praised the operator's dedication to serving both serious and casual bettors. The analyst mentioned that the app is attracting more than the usual interest from female bettors.
One aspect to monitor is Penn’s capability to resolve certain problems with the Hollywood Casino-branded iGaming platform, which so far hasn’t significantly gained from transitions from ESPN Bet. Jonas mentioned that management is very concentrated on enhancing iGaming performance.
