On Wednesday, Stifel maintained its Hold rating and $19.00 stock price target for Penn National Gaming (NASDAQ:PENN). The firm's stance comes after hosting Penn National Gaming's management at the Stifel Cross Sector Insight Conference.
During the conference, discussions highlighted ongoing investor worries about the company's increasing losses in its Interactive segment. These concerns were recently amplified by an activist proposal submitted to the company's Board of Directors.
The management team, constrained in their response to the activist proposal, did highlight the undervalued aspect of Penn National's brick-and-mortar (B&M) operations. According to Stifel, the B&M segment continues to show stable consumer trends and is expected to generate solid returns from the company's four development projects.
Despite the pressures on valuation due to the "Interactive discount," which might persist until there's an improvement in online sports betting (OSB) handle share or more significant corporate measures are considered, Stifel suggests that the current trading levels could offer an attractive opportunity for long-term investors. The firm's $19 price target indicates approximately 20% potential upside from the current stock price levels.
Stifel has decided to maintain its Hold rating on Penn National Gaming for the time being. The firm indicates that while there may be potential for growth, the changes necessary to realize this potential may require time to materialize. This cautious outlook reflects an acknowledgment of the challenges faced by the company and the time it might take for any strategic shifts to positively impact the stock's performance.
In other recent news, Penn National Gaming has been the subject of varying analyst reports. Raymond James initiated coverage on the company with an Outperform rating and a share price target of $20.00, citing underperformance in its digital segment and issues within its land-based operations.
On the other hand, Needham maintained its Buy rating and a $26.00 price target for Penn National Gaming, buoyed by the company's collaboration with ESPN and technological strides.
Still, BofA Securities downgraded Penn National Gaming from Buy to Neutral and reduced the price target to $17.50 following the company's first-quarter results, which did not meet expectations. CFRA analyst Zachary Warring also adjusted the price target for the company, raising it to $24.00 from the previous $16.00, reflecting a valuation pegged at 5.9 times the firm's 2024 EBITDA estimate.
Lastly, Needham revised its outlook on Penn National Gaming, reducing the stock price target to $26.00 from the previous $32.00, primarily due to challenges within the company's Interactive segment. These recent developments highlight the varied perspectives of different analyst firms on the company's potential performance.
InvestingPro Insights
InvestingPro data underscores the challenges faced by Penn National Gaming (NASDAQ:PENN), with a market capitalization of $2.39 billion and a negative P/E ratio, reflecting the company's lack of profitability in the last twelve months as of Q1 2024.
The revenue has experienced a slight decline, with a -3.29% change over the last twelve months and a quarterly decrease of -3.97%. Despite these headwinds, Penn National has seen a significant return over the last week, with a 9.88% price total return, suggesting some investor optimism in the short term.
Two InvestingPro Tips highlight critical aspects for investors considering Penn National's stock. The company operates with a significant debt burden, which may influence its financial flexibility and investment decisions. Moreover, the high EBITDA valuation multiple indicates that the stock may be trading at a premium relative to its earnings before interest, taxes, depreciation, and amortization. These factors, combined with the volatility in stock price movements, suggest that investors should approach with caution.
For those looking to delve deeper into the financials and future projections of Penn National Gaming, InvestingPro offers additional insights and tips. With an InvestingPro subscription, you can access these valuable resources to inform your investment decisions. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 11 additional InvestingPro Tips available for Penn National Gaming, which could provide further guidance on the stock's potential performance.
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