Morgan Stanley Predicts Penn National Gaming Can Beat Forecast Despite Stock Decline

Written By Nicholaus Garcia on April 25, 2022
Morgan Stanely gives an upgrading rating to Penn National Gaming

Ahead of its first-quarter earnings report, Penn National Gaming ($PENN) receives a favorable outlook from one Morgan Stanley analyst.

In a note to clients, Morgan Stanley analyst Thomas Allen not only upgraded shares to “overweight” but also projects an upside of 40% from the April 22 close.

The regional casino company will report Q1 earnings on May 5.

Penn National online gaming provides opportunity

Although casino companies have yet to recover from the pandemic lows fully, operators like Penn National were able to benefit from the boom that was online gambling.

Allen writes:

“Penn’s recent underperformance coupled with better sports betting performance presents an opportunity. While Penn’s underperformance was somewhat warranted given more mixed recent earnings results and declining sports betting market share in key states like Michigan, Pennsylvania and Illinois, we have seen sports betting share stabilize in the US.”

In recent months, Penn Nationals’ grip on the market has been shrinking, especially in the aforementioned states. Both Michigan online and Pennsylvania online have 14 betting apps. Even though Illinois sports betting only has seven apps, the state has left the door open for more.

But the US isn’t the only market Penn National has been keeping tabs on.

The company’s recent acquisition, theScore Bet, debuted in Ontario, Canada, and is off to a good start.

Financial outlook for Penn National Gaming

Allen lowered his target price from $56 to $51 per share. But as mentioned, this still implies a significant upside.

As of writing, shares of $PENN were trading at $38.19.

The stock is down 29.51% year-to-date, which to some might be a cause for concern. However, Allen still expects the company to beat first-quarter forecasts.

“While one quarter does not make a trend, the 1Q strength from a number of properties leads us to believe $PENN is in a relatively good position to hit 2022 expectations, potentially more so than Boyd Gaming ($BYD), where regional properties where states have reported were 1% below our prior 1Q expectations.”

Boyd Gaming is another regional operator that runs 28 gaming venues in 10 states. Boyd Gaming reports Q1 financials on April 26.

Photo by Sean Pavone / Shutterstock.com
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Nicholaus Garcia

Nick has had stints in Chicago and Washington, D.C., writing about politics, financial markets, and sports betting. He graduated from Texas Tech University and completed his master's degree in journalism at Columbia College Chicago.

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