On Thursday, JPMorgan updated its outlook on PENN Entertainment Inc (NASDAQ: PENN), raising the price target from $18.00 to $19.00 while maintaining an Overweight rating on the stock. The firm's projections for the company's land-based casino EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs) for the full year of 2024 remain unchanged at $1.954 billion. However, the estimated loss for the company's Interactive segment has been reduced from $525 million to $485 million.
Looking ahead to 2025, JPMorgan forecasts land-based EBITDAR at $1.91 billion, consistent with previous estimates. The anticipated loss for the Interactive business has been significantly lowered to $75 million from the initial estimate of $150 million. The analyst emphasized the potential impact of PENN's upcoming launch of an improved platform, which aims to enhance features such as parlay product offerings, ESPN account linking, and user engagement. Despite the competitive landscape, with rivals ramping up user promotions, the firm suggests that investors might have the opportunity to grow more optimistic about PENN and its collaboration with ESPN BET.
The price target for December 2025 is set based on a 6.5x multiple applied to the land-based casino lease-adjusted EV/EBITDAR, which contributes approximately $17 per share in value, and the same multiple applied to the estimated market access fees for 2025, accounting for roughly $2 per share. No additional value has been assigned to the ESPN BET or Interactive segments beyond the market access fees.
PENN's second-quarter 2024 land-based casino performance was reported to be aligned with JPMorgan and consensus expectations, posting property-level EBITDAR of $497 million, a 4% year-over-year decrease. The margin for the quarter was slightly below estimates at 34.8%. The company's Midwest and West properties outperformed projections with year-over-year growth, while the Northeast and South segments fell short of expectations with declines. PENN noted a stable consumer base in its land-based casinos and highlighted market share gains in Ohio, Maryland, and Iowa, with particular momentum at its Greektown and M Resort properties. The firm also confirmed that PENN's four development projects are progressing on budget and on schedule.
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