Tuesday, Stifel reiterated a Hold rating on PENN Entertainment Inc (NASDAQ:PENN) with a price target of $20.00. The firm attended PENN's investor presentation at the Global Gaming Expo (G2E), where the company's management team provided an extensive overview of their strategies and preliminary financial results for the third quarter.
The pre-released third-quarter results revealed a mix of outcomes. Interactive losses were approximately $30 million more than previously anticipated. However, the Retail Adjusted EBITDAR is expected to be around 6% below the midpoint of market consensus.
Additionally, there were positive developments with the ESPN Bet parlay mix and structural hold, which have been performing better than expected due to a user base that appears to be more casual and sourced from ESPN. Management also noted an improvement in the handle per user on a sequential basis.
PENN's near-term product roadmap appears to be solid, with several initiatives slated for completion by the end of 2025. These include linking accounts with ESPN, direct-to-consumer streaming integration, and the launch of a standalone Hollywood iCasino application. Following the presentation, Stifel has become slightly more optimistic about PENN's prospects, anticipating the company's shares to perform modestly better tomorrow, assuming all other factors remain constant.
Despite the more positive outlook, Stifel has chosen to maintain the Hold rating as they await further evidence of sustained market share momentum in online sports betting and iCasino operations. The firm has adjusted its financial model to align with the pre-released third-quarter results, but the price target remains unchanged at $20.
In other recent news, PENN Entertainment Inc. 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. The company also introduced its new Chief Technology Officer, Aaron LaBerge, who has outlined plans for product enhancements and market expansion.
Barclays has maintained its Overweight rating on PENN, with a price target of $23, following the company's investor day in Las Vegas. The firm highlighted PENN's preliminary third-quarter Digital EBITDA, which exceeded guidance by $30 million, but noted that Retail preliminary results fell short by the same amount due to various disruptions.
Barclays also pointed out PENN's revised framework for 2026 Digital EBITDA, which now assumes profitability at lower market share projections of 6-10% by 2026. The upcoming integration between ESPN BET and the ESPN app, set for November, is viewed as a significant aspect of the overall integration story.
PENN Entertainment's 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.
InvestingPro Insights
PENN Entertainment's recent investor presentation and preliminary Q3 results have shed light on the company's current position and future strategies. To complement this information, InvestingPro data reveals that PENN's market capitalization stands at $2.78 billion, with a revenue of $6.28 billion over the last twelve months as of Q2 2024. However, the company's revenue growth has declined by 4.18% during this period.
InvestingPro Tips highlight that PENN operates with a significant debt burden and that stock price movements are quite volatile. These factors align with Stifel's cautious Hold rating and the need for further evidence of sustained market share momentum. Additionally, analysts do not anticipate the company will be profitable this year, which is consistent with the reported interactive losses and the below-consensus Retail Adjusted EBITDAR.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for PENN Entertainment, providing a deeper understanding of the company's financial health and market position.
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