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PENN Entertainment Inc PENN

Morningstar Rating
$18.50 +0.20 (1.09%)
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Company Report

Penn Earnings: Digital Business More Promotional Near Term, but Ramping Profits on the Horizon

Penn shares lost 14% of their value after fourth-quarter results showed far higher promotional spending for its interactive sports betting and iGaming business. While we expect some promotional activity around the launch of sports betting in North Carolina in March and New York later this year, we still estimate Penn’s interactive segment will produce a low-20% adjusted EBITDA margin by the end of this decade. This near-term expense and more tempered interactive market share assumptions over the intermediate term due to persistent competition drive our planned high-single-digit percentage reduction in our $27 fair value estimate. While shares might remain volatile in the near term, we see value for long-term-oriented investors.

Price vs Fair Value

PENN is trading at a 31% discount.
Price
$18.50
Fair Value
$52.00
Uncertainty
Very High
1-Star Price
$89.62
5-Star Price
$52.50
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

We see Penn's domestic properties and partnership with ESPN as well positioned to benefit from the more than $40 billion U.S. sports betting and iGaming revenue opportunity by 2030.

Bears

Debt levels are elevated, which could inflate financing costs for future renovations and investment.

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News

Trading Information

Previous Close Price
$18.30
Day Range
$17.6118.90
52-Week Range
$16.4631.63
Bid/Ask
$18.30 / $18.51
Market Cap
$2.82 Bil
Volume/Avg
7.2 Mil / 5.9 Mil

Key Statistics

Price/Earnings (Normalized)
15.54
Price/Sales
0.44
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
5.31%

Company Profile

Penn Entertainment’s origins date back to its 1972 racetrack opening in Pennsylvania. Today, Penn operates 43 properties across 20 states and 12 brands (such as Hollywood Casino and Ameristar), with land-based casinos representing 90% of total sales in 2022 (10% was from the interactive segment, which includes sports, iGaming, and media revenue). The retail portfolio generates high-30% EBITDAR margins and helps position the company to obtain licenses for the digital wagering markets. Additionally, Penn’s media assets, theScore and ESPN (starting with its partnership launch Nov. 14, 2023), provide access to sports betting/iGaming technology and clientele, helping it form a leading digital position.
Sector
Consumer Cyclical
Industry
Resorts & Casinos
Stock Style Box
Small Value
Total Number of Employees
23,333

Competitors

Valuation

Metric
PENN
DKNG
WYNN
Price/Earnings (Normalized)
15.5425.50
Price/Book Value
0.8824.49
Price/Sales
0.445.491.75
Price/Cash Flow
3.329.17
Price/Earnings
PENN
DKNG
WYNN

Financial Strength

Metric
PENN
DKNG
WYNN
Quick Ratio
0.931.051.85
Current Ratio
1.111.341.93
Interest Coverage
−0.16−316.161.15
Quick Ratio
PENN
DKNG
WYNN

Profitability

Metric
PENN
DKNG
WYNN
Return on Assets (Normalized)
−1.80%−11.51%3.39%
Return on Equity (Normalized)
−8.09%−44.18%
Return on Invested Capital (Normalized)
0.57%−20.84%7.57%
Return on Assets
PENN
DKNG
WYNN
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Resorts & Casinos Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
LVS
Las Vegas Sands CorpZvstkj$38.6 Bil
GXYYY
Galaxy Entertainment Group Ltd ADRDchqrtg$23.5 Bil
GXYEF
Galaxy Entertainment Group LtdGvynbd$23.5 Bil
SCHYF
Sands China Ltd Shs Unitary 144A/Reg SBycdvh$22.8 Bil
SCHYY
Sands China Ltd ADRHggnh$22.8 Bil
MGM
MGM Resorts InternationalSlwx$13.7 Bil
WYNN
Wynn Resorts LtdKxzzxl$11.3 Bil
CZR
Caesars Entertainment IncPky$9.3 Bil
MLCO
Melco Resorts and Entertainment Ltd ADRPkvgnh$3.1 Bil

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