I thought long and hard before I finally posted because of the very reactions that have come in. Nowhere do I doubt the viability of PENN nor its excellenmt track record. The only reason I sold out in the mid to high 60's is I felt it was going to be tough to get another 20% out of it to $80/share. Very tough, unless a suitor comes along and Carlino has made it clear in the past he is not interested.
Take away the CT growth, and how do you justify a p/e of 25-30? Even with PNRC slots and AGY, a stock price of $80 gets you a p/e of 20. How much higher can the p/e go? What about a slowdown in growth at CT? What happens if PENN is forced to sell one of the baton Rouge casinos?
Under the right scenarios PENN can travel to 80-90, but nearly everything needs to go right for it to do so. No Md. slots, no Indiana slots, no KY slots, a tax pullback without a Chicago city casino in Illinois, no Indian competition in and around L-Berg. PENN has superb management and it just might happen, but it only takes one or two items to scare off the market and put a lower p/e on PENN's earnings.
Separate the company from the market. PENN as a company will be fine, very fine. As a stock investment, it will be okay for as long as the market is willing to reward it with a higher than average p/e. But what if events transpire to make the powers to be in the market turn a little cautious. Just a little.
In my opinion PENN will be in a range between $50 on the downside to $65 on the upside this year, pre-split of course. A pretty good spread if one times it right, but that is tough.
Finster- i agree with you that Penn ran too far too fast. Personally, i think one of the biggest things to worry about is CT. Many people, and i mean alot of the reg's who think nothing of putting 400-1000 in the machines, have stopped coming or cut way back. Tired of little payoffs, little play, bad service. This might not be showing up in the numbers, but eventually, it will hurt them. If Md. gets slots, it will really set them back. You can't take people's money and not give them entertainment, and be rude on top of it.
Penn closed at an all time high 15 days ago. Since then we've seen a record week at CT, and excellent business throughout the corporation.
So what accounts for a 15% drop in 15 days? Maryland. Ehrlich makes his annual push for slots, the market gets spooked, overreacts, and here we are.
Actually, I heard on the news driving home today that Speaker Busch is now supporting some sort of limited slots bill, with a total of 8500 slots, not the 14,000 Ehrlich wants. I havn't been able to confirm that anywhere else.
It may happen, but there is a long, long way to go in MD. There are so many competing interests and agendas. Even those that generally support slots absolutely do not want them in their back yard. Pimlico and Rosecroft are virtually off the table. Where will they put them? Read this excellent opinion piece from today's Baltimore Sun.
If it does happen, my feeling, and Penn management's feeling as they have stated many times, is this will hardly devastate CT. They will get table games which will start to turn CT into a true destination resort. They will market, which they do little of now. And the fact is, the Baltimore/DC market is the the third largest in the country, its immense! And very wealthy. I think it can support a couple more casinos, with all prospering very nicely.
I think the 15% drop in Penn is ridiculous. There are always risks, but there are always opportunities. I think Harrisburg is going to work out better than anyone guesses. The demographics there are perfect.
To me, Illinois is much more important than MD. Another immense market with pentup demand. With 3 casinos there, I think profits will explode if Penn is allowed to grow this business instead of being forced to limit growth in order to stay under the punitive tax levels.