On Monday, Susquehanna has adjusted its price target for PENN Entertainment Inc (NASDAQ: PENN), moving it down to $25.00 from the previous $26.00, while still holding a Positive outlook on the stock.
The firm's analyst noted that since PENN had already shared its third-quarter results during an analyst meeting on October 7, the focus for investors should now shift to the company's digital progress in the fourth quarter and potential discussions regarding the 2025 land-based margins.
PENN's recent digital initiatives, including the improved ESPN-Bet app launch in mid-August, heightened monetization, and enhanced user engagement, have been highlighted as key achievements. The introduction of "account linking" in late October was also mentioned as a fulfillment of the company's promises. The fourth quarter is seen as a particularly sensitive period for PENN's stock performance.
The company's land-based operations have reportedly surpassed those of its closest competitor, CZR, by a significant margin in the third quarter, estimated to be more than 500 basis points. This trend is expected to continue into the fourth quarter of 2024. The analyst anticipates that if PENN can produce margin growth in a flat to declining revenue environment for 2025, the stock could experience a rally.
Despite the reduction in the price target, Susquehanna maintains a Positive rating on PENN shares. The firm has adjusted its estimates and price target to reflect the current outlook, setting the new price target at $25, down from $26.
InvestingPro Insights
PENN Entertainment's financial landscape presents a mixed picture, aligning with Susquehanna's cautious yet optimistic stance. According to InvestingPro data, PENN's market capitalization stands at $2.91 billion, with a price-to-book ratio of 0.95, suggesting the stock might be undervalued relative to its assets. This could support Susquehanna's maintained Positive rating, despite the lowered price target.
InvestingPro Tips highlight that PENN operates with a significant debt burden and has experienced volatile stock price movements. These factors may contribute to the analyst's adjusted price target and emphasize the importance of the company's digital progress and land-based margin discussions for 2025, as mentioned in the article.
The company's revenue for the last twelve months as of Q2 2024 was $6.28 billion, with a revenue growth of -4.18% over the same period. This decline in revenue aligns with the article's mention of a potentially flat to declining revenue environment for 2025, making PENN's ability to produce margin growth crucial for stock performance.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 8 more InvestingPro Tips available for PENN Entertainment, which could provide further context to the company's financial situation and future prospects.
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