Jefferies has maintained its Hold rating on shares of PENN Entertainment Inc (NASDAQ: PENN), with a steady price target of $20.00.
The firm's position comes after reviewing the company's presentation, which provided further details on its online sports betting (OSB) operations and near-term prospects for its land-based casinos.
The presentation by PENN Entertainment was noted to offer increased clarity on its online sports betting initiatives, as well as guidance on the performance of its physical casino operations. These insights are seen as positive for the company's stock.
The analyst pointed out that initial data from ESPN Bet suggests a promising start and potential synergies between the company's online and land-based ventures. This cross-benefit is considered a key factor in the success of PENN's omni-channel strategy.
Despite the optimistic signs, Jefferies remains cautious regarding PENN's digital strategy due to the associated costs and the timeline required to reach profitability. The firm's current stance reflects a wait-and-see approach as the company continues to develop its digital and land-based integration.
PENN Entertainment's focus on expanding its online sports betting alongside its traditional casino operations is part of a broader industry trend towards digital gambling solutions. The company's efforts to capitalize on the partnership with ESPN Bet are indicative of its strategic direction in this competitive market.
In other recent news, PENN Entertainment Inc. has been making significant strides, as highlighted by various analyst firms. Wells Fargo has maintained an Equal Weight rating on PENN shares, emphasizing the potential growth through its partnership with ESPN BET.
Needham has sustained a Buy rating, applauding the company's year-over-year improvements in parlay mix and strong performance in Ontario. Truist Securities also reiterated a Buy rating, focusing on the potential for significant EBITDA contributions from the Interactive segment by 2026.
Deutsche Bank, on the other hand, maintained a Hold rating, citing regional performance challenges despite the company's confidence in ESPN Bet.
PENN's recent developments include a notable increase in hold percentage to 9.1% in September 2024, attributed to the casual "everyday" bettor. The company's betting platform is expected to reach breakeven in 2025 and is projected to become materially profitable by 2026. Key milestones include the anticipated ESPN account linking and the rollout of ESPN's direct-to-consumer offering in the summer of 2025.
The company has reported a record quarter for net gaming revenue in its Interactive segment, with Q2 retail revenue of $1.4 billion and an adjusted EBITDAR of $497 million.
PENN's new Chief Technology Officer, Aaron LaBerge, has outlined plans for product enhancements and market expansion. PENN plans to introduce a standalone iCasino app by early 2025 and aims to generate positive cash flow from the Interactive unit by 2026.
InvestingPro Insights
Recent InvestingPro data provides additional context to PENN Entertainment's current financial position and market performance. The company's market capitalization stands at $2.77 billion, reflecting its significant presence in the gaming industry. However, PENN's financial metrics reveal some challenges. With a negative P/E ratio of -7.44 over the last twelve months as of Q2 2024, the company is currently not profitable, aligning with the InvestingPro Tip that analysts do not anticipate profitability this year.
The revenue for the last twelve months as of Q2 2024 was $6.28 billion, but the company experienced a revenue decline of 4.18% during this period. This contraction in revenue supports Jefferies' cautious stance on PENN's digital strategy and the associated costs.
InvestingPro Tips highlight that PENN operates with a significant debt burden and that its stock price movements are quite volatile. These factors may contribute to the Hold rating maintained by Jefferies, as they suggest potential risks for investors. Additionally, the company does not pay a dividend to shareholders, which may be a consideration for income-focused investors.
It's worth noting that 3 analysts have revised their earnings upwards for the upcoming period, which could indicate some positive expectations despite the current challenges. For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into PENN Entertainment's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.