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Penn National (PENN) Strategies Look Strong: Should You Retain?

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Penn National Gaming, Inc. (PENN - Free Report) is likely to benefit from its acquisition strategies, the Barstool Sports expansion, strategic partnerships and 3C’s initiatives. However, cut-throat competition from peers, travel restrictions and uncertainties related to the pandemic are headwinds.

Let us discuss the factors that highlight why investors should retain the stock for the time being.

Growth Catalysts

Penn National is known for its acquisition strategies that help the company expand its presence as well as improve revenue yields. During second-quarter 2021, Penn National agreed to acquire Score Media and Gaming, one of the number one sports apps in Canada and the third most popular sports app in North America. The company expects the acquisition to provide adjusted EBITDA accretion by the end of year two and an additional $200-million medium-term adjusted EBITDA opportunity with a $500-million incremental long-term adjusted EBITDA growth. Also, the company completed the Hollywood Casino Perryville acquisition on Jul 1, 2021, boosting presence in Maryland.

Penn National continues to focus on Barstool Sports expansion across the United States. In a bid to expand the brand, Penn National plans to open or rebrand five more Barstool Sports retail sportsbooks by the end of 2021. Also, the company is making progress to build out Barstool-branded sports bars with the initial locations in Philadelphia and Chicago that are scheduled to open in the latter half of 2021.

Penn National continues to expand and leverage its brand power. Its strategic partnerships with DraftKings, PointsBet, theScore and The Stars Group bode well. These partnerships are likely to help the company maximize sport betting and iGaming across 19 states. DraftKings will cover Florida, Missouri, Ohio, Pennsylvania and West Virginia for 10 years.

The company emphasizes on the usage of new generation of cordless, cashless and contactless technologies, collectively known as 3C’s. Such initiatives are likely to improve efficiency and customer service, thereby boosting the top line. During June 2021, the company successfully launched its 3C technology at Hollywood Casino at Penn National Race Course. This was followed by another implementation of 3C at the Meadows Casino in mid-July. Going forward, the company plans to launch the 3C's across its casinos in Pennsylvania. It also plans to roll out in other regions, subject to regulatory approvals.

Concerns

Zacks Investment Research
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Shares of Penn National have declined 5.4% so far this year against the industry’s growth of 5%. The dismal performance was caused by the coronavirus pandemic. COVID-related travel restrictions continued to impact the company’s performance significantly. The spread of the Delta variant is another concern. Given the uncertainty revolving around the crisis, chances of operational restrictions (imposed by governmental authorities), reimposing stay at home orders and travel restrictions cannot be ruled out.

Furthermore, the company is persistently facing intense competition from various casinos, video lottery, gaming at taverns and other Internet wagering services.

Zacks Rank & Key Picks

Penn National currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include Boyd Gaming Corporation (BYD - Free Report) , Red Rock Resorts, Inc. (RRR - Free Report) and Golden Entertainment, Inc. (GDEN - Free Report) , each sporting a Zacks Rank #1.

Boyd Gaming has a three-five year earnings per share growth rate of 40.8%.

Red Rock has a trailing four-quarter earnings surprise of 228%, on average.

Golden Entertainment’s 2021 earnings are expected to surge 226.4%.