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Penn National Gaming Down 27% in 6 Months: Can It Rebound?

Zacks Equity Research

The past six months has not been an encouraging one for the Gaming industry, and Penn National Gaming, Inc. PENN is no exception. Evidently, shares of Penn National have lost 26.9% compared with the industry’s 14.9% decline. However, the stock might bounce back on account of its efforts to strengthen sport betting and other strategic initiatives. Let’s delve deeper.

Factors Likely to Drive Growth

Being a leading gaming company in the United States, Penn National is known for its consistent business strategies and strong brand recognition. Through various acquisition and divestitures, the company managed to expand its presence globally. Even then, Penn National is consistently expanding and leveraging its brand power.

Most of the gaming companies are now banking on sports betting, following its legalization outside Nevada. Also, Penn National is leaving no stone unturned to strengthen its sports betting foothold. The company has announced historic strategic partnerships with DraftKings, PointsBet, theScore and The Stars Group. Backed by these partnerships, Penn National is anticipated to expand sports betting and iGaming across 19 states. DraftKings will cover Florida, Missouri, Ohio, Pennsylvania and West Virginia for 10 years.

Moreover, the company recently started sports betting at Ameristar Casino Council Bluffs. Penn National will launch sports betting at Ameristar Casino East Chicago and  Hollywood Casino Lawrenceburg, Indiana, starting Sep 1, 2019.

These aforementioned strategic efforts along with increased demand for leisure services and the company’s enormous scale will further boost Penn National’s top line. In 2018, 2017 and 2016, revenues increased 14%, 3.7% and 6.9%, respectively. The uptrend continued in first and second-quarter 2019 as well. On a year-over-year basis, the metric improved 36.4% and 28.8% each.



For the third quarter of 2019, net revenues are expected to be $1,370.5 million, reflecting a 73.5% improvement from the year-ago quarter. Following robust top-line growth in the second quarter, Penn National raised its 2019 view. Full-year revenues are anticipated to be $5,338 million, up from the previously anticipated $5,173.1 million. Revenues are projected to rise 48.8% year over year in 2019.

On the bottom-line front, the Zacks Consensus Estimate for the current and next year has increased 16 cents and 11 cents to $1.58 and $2.21, respectively, over the past 30 days.   

Penn National, which shares space with Boyd Gaming Corporation BYD, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Key Picks

Some other top-ranked stocks, which warrant a look in the same space, include Melco Resorts & Entertainment Limited MLCO and SciPlay Corporation SCPL, each carrying a Zacks Rank #2 (Buy).

Melco Resorts & Entertainment has an impressive long-term earnings growth rate of 22.1%.

SciPlay’s second-quarter 2019 earnings surpassed the Zacks Consensus Estimate by 200%.

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