Penn National Tops Q3 Estimates, Barstool Sportsbook Extends Pennsylvania Growth

Posted on: October 29, 2020, 09:22h. 

Last updated on: October 29, 2020, 02:36h.

Shares of Penn National Gaming (NASDAQ:PENN) are trading modestly higher Thursday. The regional casino company delivered third-quarter results that soundly topped Wall Street estimates.

Penn National Q3
Penn National’s Greektown Casino in Detroit, seen here. Regional properties contributed to a Q3 earnings beat. (Image: Benzinga)

The operator of gaming venues under the Argosy and Hollywood brands, among others, said it earned 93 cents a share on revenue of $1.13 billion in the July through September period. Analysts expected earnings of 48 cents a share on turnover slightly below the figure reported by the company.

Penn notched earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) of $452.6 million during the quarter, topping its own previous estimate of $410 million to $450 million. The third-quarter story echoes those of other regional operators this earnings season, with improving margins paving the way for companies to beat estimates.

Consistent with what we have heard from other regional operators, PENN utilized strong post-reopening customer demand and meaningful margin enhancement measures to deliver better than expected 3Q20 operating results,” said Stifel analyst Steven Wieczynski in a note to clients today.

He notes the positive trends are carrying over into October, perhaps giving rise to some improvement in Penn equity today. The stock is up more than two percent at this writing, snapping a skid that’s seen it lose more than 18 percent over the past month.

Talking Barstool Sportsbook

Penn’s big September quarter news was the debut of the Barstool Sportsbook mobile betting app in its home state of Pennsylvania.

The company Penn paid $163 million for a 36 percent stake in earlier this year, got off to a hot start in its September debut, and company data confirm the app is proving to be consistent. This is the first test of its relationship with David Portnoy’s Barstool Sports.

“As of October 24th, nearly 48,000 people have registered through the app in Pennsylvania alone, and over the course of the first 37 days of operation, the app generated a total handle of $78 million across 30,000 first-time depositors,” according to Penn.

Barstool Sportsbook is delivering the goods again this month without relying heavily on promotional activity.

“Month-to-date in October, the app has generated $48.4M in the handle while only having a 3% promo credit percentage of handle,” he said. “This is important to us, as we want to see PENN/Barstool stay calm as it relates to promotions/advertising.”

Favorable Setup

Penn is targeting Michigan over the next few months as the next stop for the Barstool Sportsbook app before a broader rollout occurs over the course of 2021.

Enthusiasm for sports betting, coupled with a diverse regional casino portfolio and limited exposure to the Las Vegas Strip, are factors that the investment community expects will combine for upside in Penn stock.

“Additionally, we do not expect the momentum behind the broader US sports betting growth theme to dissipate anytime soon,” said Wieczynski.

He reiterates a “buy” rating on Penn, with an $85 price target, implying upside of roughly 51 percent from Wednesday’s close.