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Should You Exit This NASDAQ – Listed Casinos & Gaming Stock – PENN

Feb 25, 2022 | Team Kalkine
Should You Exit This NASDAQ – Listed Casinos & Gaming Stock – PENN


Penn National Gaming, Inc.

Penn National Gaming, Inc. (NASDAQ: PENN) is a gaming and racing property operator and a video gaming terminal (VGT) operator in the United States. Retail sports betting, online sports betting, online social casinos, bingo, and online casinos are all part of the company's portfolio. It has locations in Indiana, Iowa, Mississippi, Nevada, Pennsylvania, and West Virginia that allow live sports betting.

Why Should Investors Exit?

  • Rise in Debt Profile: The company reported its total traditional debt of USD 2.75 billion as of December 31, 2021, vs. USD 2.43 billion as of December 31, 2020, implying an added risk to its balance sheet.
  • Dwindling Outlook: In FY21, the firm recorded adjusted Earnings before interest, taxes, depreciation, amortization, and rent costs (EBITDAR) of USD 1.99 billion. It has lowered its outlook for FY22, expecting adjusted EBITDAR to range between USD 1.85 and 1.95 billion.
  • Detrimental Technical Indicators: The company's closing market price was USD 49.69, which was hovering around the 50 DMA moving average and encountering resistance. Furthermore, the 14-day RSI (~56.23) indicates that the stock is approaching the overbought territory and may likely fall from current levels.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

PENN's share price has fallen 38.53% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 37.76 to USD 142.00. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 42.90. As the company is estimating deterioration in FY22 metrics, increase in debt profile, current valuation, and unfavourable technical indicators, we recommend a "Sell" rating on the stock at the closing price of USD 49.69, up 5.19% as of February 24, 2022.

Three-Year Technical Price Chart (as of February 24, 2022). Source: REFINITIV; Analysis by Kalkine Group 

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.