Penn Ascent Sets Rapid Price Target Revision, Barstool App Targets Illinois by March Madness

Posted on: February 5, 2021, 05:30h. 

Last updated on: February 5, 2021, 01:12h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Things change fast in financial markets, and Penn National Gaming (NASDAQ:PENN) is proving that point. Backed by an 8.52 percent gain on Thursday, Penn stock is higher by 10.57 percent. That surge is prompting one analyst to alter his price forecast on the gaming name.

Penn stock
The Barstool Sportsbook at the Greektown Casino in Detroit, seen here. An analyst is highly bullish on Penn stock. (Image: Reading Eagle)

After the close of US markets Thursday, Stifel analyst Steven Wieczynski issued a note to clients in which he reiterated a “buy” rating on Penn, with a new price target of $124. That new forecast comes just a few days after the analyst tagged the regional casino operator with a $118 estimate. It closed at $118.34 yesterday.

While some would argue PENN shares could be overvalued, we believe shares can continue to work, especially thru 2021, as we expect a number of states to pass gaming legislation which should keep the sports betting/iGaming momentum rolling,” said Wieczynski.

His $124 price outlook is the highest among all analysts covering Penn stock and is almost 31 percent above the consensus target of $94.75. Shares of the operator of Ameristar and Hollywood casinos, among other brands, are higher by 36 percent over the past month.

Sports Betting Momentum

Penn reported fourth-quarter results Thursday, and while earnings per share and revenue missed Wall Street forecasts, the stock rallied as analysts and investors embraced strong iGaming and sports figures.

The company’s Barstool Sportsbook app is live in Pennsylvania and Michigan. The early returns out of Michigan are encouraging, as Penn said after the app launched on Jan. 22, it gained 48,000 registered users while notching a total handle of $27.5 million in just 10 days.

“Sports betting trends continue to be encouraging. Michigan rollout was better than in PA because PENN launched when the state launched,” said Wieczynski.

The analyst said Barstool Sportsbook could be ready to go in the fast-growing Illinois market in time for the NCAA Tournament, also known as March Madness. After that, Penn could launch the mobile betting app in a new state every three to five weeks before getting to 10 states.

Penn Stock High, Costs Low

While the Barstool Sportsbook app is live in just two states, its ability to gain registered users is seen as impressive by analysts. The operator’s fast start in Michigan and its home state of Pennsylvania stands out even more when considering Penn, unlike many of its rivals, isn’t dropping big dollars to reel in customers.

“PENN’s customer acquisition costs remain low relative to peers. While some other online providers are indicating $300 to $800 per customer acquisition costs, PENN has been well below the low-end of that range,” said Wieczynski. “Even if they start to get more aggressive with promotions and advertising, PENN still believes they can be profitable well inside that range.”

Additional sports betting catalysts for Penn this year include procuring licenses in Louisiana and Maryland, which should be an easy task, given the company’s brick-and-mortar footprint in those states. There is also the potential for Massachusetts, Missouri, and Ohio to at least approve sports wagering.