Penn Entertainment Stock Could Be Durable in Mild Recession

Posted on: March 14, 2025, 02:43h. 

Last updated on: March 14, 2025, 02:43h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

• Penn Entertainment stock has been a laggard
• Thesis belies conventional view of gaming stocks in recessions

In what may come as a surprise to some investors, Penn Entertainment (NASDAQ: PENN) could be among the more durable stocks should a mild recession come to pass.

“Durable” is in the eye of the beholder because recession chatter has escalated in recent weeks while shares of the regional casino operator are off 14% year-to-date. Compounding those woes is the point that some Penn rivals are flagging softness among income-sensitive bettors. Still, it’s possible that Penn proves less bad than other consumer cyclical stocks in moderate recession scenario.

However, Reflexivity highlighted a “somewhat counterintuitive result,” noting consumer discretionary — the sector that’s home to casino stocks — outperforms defensive peers during mild recessions. The research argues that consumer cyclical equities, such as Penn, historically price-in economic malaises before they arrive, positioning the group to be somewhat steady against those backdrops. That pricing-in may be occurring this year as the Invesco S&P SmallCap Consumer Discretionary ETF (NYSE: PSCD), which holds Penn stock, is down 15.52% year-to-date.

Recession Form Matters to Penn Stock

The extent to which Penn is hampered during a recession depends on the nature of that economic contraction.

So what could a trade war-led recession entail? Unfortunately, this could be a nasty one because high tariffs will mean low growth and high inflation – the specter of stagflation,” Reflexivity Co-Founder and President Giuseppe Sette said in a report.

The tariff scenario is playing out today and it’s punishing gaming stocks. President Trump’s trade levies are weighing on consumer sentiment, prompting some income groups to dial back spending at regional casinos — bad news for Penn, which is the largest operator of such venues.

“The cracks in the US economy are deepening. Trump’s on-off and erratic tariff policies have introduced heightened uncertainty for businesses and investors alike,” observes deVere Group CEO Nigel Green. “The damage has already been done. Market waves of uncertainty have taken their toll, investor confidence has been battered, and businesses are scrambling to mitigate costs they never asked for. Global trade flows are adapting to a world with the US becoming no longer the dominant, reliable player it once was.”

Still, Penn is on Reflexivity’s list of 15 stocks that historically have held well during recessions. Add to that, gaming device giant Light & Wonder (NASDAQ: LNW) is one of this year’s best-performing consumer cyclical stocks as highlighted by a gain of nearly 16%, indicating there could be some home hope for the segment even if the economy weakens.

Recessions Aren’t Kind to Casino Stocks

Unsurprisingly, recessions are unkind to casino equities. In 2022 when there was two consecutive quarters of negative GDP growth — the traditional definition of a recession — the VanEck Gaming ETF (NYSE: BJK) lost almost 13%. That ETF had the bad timing of debuting in January 2008 and proceeded to slump 57% that year as the global financial crisis set in.

Leverage is one of the primary reasons casino stocks falter during slack economies. Shares of highly indebted companies often incur punishment in the early parts of market corrections. For its part, Penn concluded 2024 with $2.59 billion in “traditional debt” or more than triple its $706.6 million in cash.