PENN
Penn National Gaming, Inc.
TMT, Consumer
07/05/2020
Presented
| Date | 07/01/2020 |
| Price | $31.91 |
| Market Cap | $4.26B |
| Ent Value | $12.54B |
| P/E Ratio | N/A |
| Book Value | $10.75 |
| Div Yield | 0% |
| Shares O/S | 133.47M |
| Ave Daily Vol | 14,520,838 |
| Short Int | 15.70% |
Current
| Price | $18.51 |
| Market Cap | $2.82B |
| Penn National Gaming, Inc. owns and manages gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. It operates through the following business segments: Northeast, South, West and Midwest.. The Northeast segment consists of the following properties: Hollywood Casino at Charles Town Races, Hollywood Casino Bangor, Hollywood Casino at Penn National Race Course, Hollywood Casino Toledo, Hollywood Casino Columbus, Hollywood Gaming at Dayton Raceway, Hollywood Gaming at Mahoning Valley Race Course, and Plain ridge Park Casino. The South and West segment comprises of the following properties: Zia Park Casino, Hollywood Casino Tunica, Hollywood Casino Gulf Coast, Boomtown Biloxi, M Resort, Tropicana Las Vegas, 1st Jackpot and Resorts. The Midwest segment controls the following properties: Hollywood Casino Aurora, Hollywood Casino Joliet, Argosy Casino Alton, Argosy Casino Riverside, Hollywood Casino Lawrenceburg, Hollywood Casino St. Louis, and Prairie State Gaming. The company was founded in 1982 and is headquartered in Wyomissing, PA. |
Publicly traded companies mentioned herein: Caesars Entertainment Corp (CZR), DraftKings Inc (DKNG), Flutter Entertainment PLC (FLTR LN), Gaming and Leisure Properties Inc (GLPI), MGM Resorts International (MGM), Penn National Gaming Inc (PENN), William Hill PLC (WMH LN)
Highlights
The presenter is short shares of Penn National Gaming (PENN) due to his belief that the stock is materially overvalued in the low $30s. PENN shares have performed extremely well in 2020 in relative and absolute terms (up 25% for the year) due to the hype around sports betting and its $163MM stake in Barstool Sports ($135MM in cash, $28MM in non-voting convertible preferred stock). He views PENN as a regional casino company with 41 properties and a bloated fixed cost structure (e.g., its lease obligations alone amount to nearly $900MM per year), and even in a best case scenario with casino revenue ramping back to 90% of 2019 levels in 2021, and 10% share of the online sports betting market, the stock is would be worth $26-$27 (this assumes $6-$7/share of value for the core business, and $20/share of value for sports betting using DraftKings as the comp). In his opinion, sports betting is only getting more competitive, and the consumer may not come back as quickly as PENN needs to offset its cash burn. As such, he’s expecting at least 10-15% upside for bears near-term, with the potential for more substantial gains if anything goes wrong over the next 12 months (“Penn’s true fair value is likely in the single digits,” he added).
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