On Tuesday, Deutsche Bank maintained a Hold rating on shares of PENN Entertainment Inc (NASDAQ: PENN), with a consistent price target of $20.00. Following the company's Investor Day event at the M Resort in Las Vegas, the firm provided insights into PENN's current operations and future outlook.
The event highlighted several key points, including management's unwavering confidence in ESPN Bet, with projected Interactive EBITDA for 2026 ranging from $100 million to $372 million. Additionally, the company has set its online sportsbook (OSB) hold guidance at 9-12%.
The company reported that ESPN Bet experienced a robust September, marked by volume growth and a favorable hold that led to higher than anticipated net gaming revenue (NGR) growth. This also resulted in smaller than expected EBITDAR losses. Despite these positive developments, regional performance continues to face challenges. The third quarter of 2024 property EBITDAR is expected to be $20-30 million below the consensus.
Management at PENN Entertainment expressed a high degree of confidence in achieving a 15% cash on cash return on its $850 million investment. This confidence is bolstered by recent successful conversions of competitor boats to land-based operations. The company's outlook and operational strategies were outlined in detail during the Investor Day, providing stakeholders with a clearer understanding of its direction and expectations for the coming years.
In other recent news, PENN Entertainment Inc. has reported a record quarter for net gaming revenue in its Interactive segment and unveiled its Q2 2024 results. The company's Q2 retail revenue was $1.4 billion with an adjusted EBITDAR of $497 million. The Interactive division, live in 19 jurisdictions with nearly 4 million unique users, has seen a narrowed quarter-over-quarter loss. The company plans to introduce a standalone iCasino app by early 2025 and aims to generate positive cash flow from the Interactive unit by 2026.
Stifel and Barclays have maintained their respective Hold and Overweight ratings on PENN, with price targets of $20 and $23. Stifel attended PENN's investor presentation at the Global Gaming Expo, where the company's management team provided an extensive overview of their strategies and preliminary financial results for the third quarter. Barclays highlighted PENN's preliminary third-quarter Digital EBITDA, which exceeded guidance by $30 million.
PENN also introduced its new Chief Technology Officer, Aaron LaBerge, who has outlined plans for product enhancements and market expansion. The company continues to focus on its partnership with ESPN, with an upcoming integration between ESPN BET and the ESPN app set for November.
InvestingPro Insights
PENN Entertainment's recent Investor Day revelations align with several key metrics and insights from InvestingPro. The company's market cap stands at $2.78 billion, reflecting its significant presence in the gaming industry. Despite management's optimistic projections for ESPN Bet, InvestingPro data indicates that PENN is not currently profitable, with a negative P/E ratio of -7.46 over the last twelve months as of Q2 2024. This aligns with the InvestingPro Tip that analysts do not anticipate the company will be profitable this year.
The company's revenue for the last twelve months as of Q2 2024 was $6.28 billion, with a slight decline in revenue growth of -4.18% over the same period. This data provides context to the challenges in regional performance mentioned in the article. Additionally, an InvestingPro Tip highlights that PENN operates with a significant debt burden, which investors should consider alongside the company's ambitious growth plans for ESPN Bet.
For those seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for PENN Entertainment, providing deeper insights into the company's financial health and market position.
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