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Here's Why Investor Should Retain PENN Entertainment (PENN)

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PENN Entertainment, Inc. (PENN - Free Report) is benefiting from robust demand for sports betting, business strategies and strong brand recognition as well as acquisitions. However, contraction in EBITDAR margin remains a concern.

Let’s delve deeper.

Growth Drivers

Being a leading gaming company in the United States, PENN Entertainment is known for its consistent business strategies and strong brand recognition. Through various acquisition and divestitures, the company’s presence became largely widespread. Even then, PENN Entertainment is still continuing to expand and leverage its brand power.

This  Zacks Rank #3 (Hold) company is focusing on sports betting expansion to drive growth. PENN has announced strategic partnerships with DraftKings, PointsBet, theScore and The Stars Group. These alliances will help the company to drive sports betting and iGaming across 19 states.

DraftKings will cover Florida, Missouri, Ohio, Pennsylvania and West Virginia for 10 years. PENN is also expecting growth opportunities in Ohio, New York, Texas, Massachusetts and Missouri.

On Apr 4, 2022, the company launched theScore Bet mobile app in Ontario, Canada. During second-quarter 2022, the company made progress in transitioning Barstool Sportsbook (in the United States) to theScore player account management and trading platform. The company anticipates the initiative to pave the path for benefits, including cost synergies, improved marketing and promotional capabilities.

On the other hand, PENN Entertainment continues to evolve toward the new generation of cordless, cashless and contactless technology, collectively known as 3Cs. The initiative not only removes friction from transactions and reduces wait times and lines but also paves path to enhance marketing capabilities.

Shares of the company have inched up 0.4% in the past six months, compared with the industry’s growth of 7.2%.

Zacks Investment Research
Image Source: Zacks Investment Research


Dismal adjusted EBITDAR margin impacted investor sentiments negatively. During third-quarter 2022, adjusted EBITDAR declined 1.7% from the year-ago quarter’s levels to $471.9 million. Adjusted EBITDAR margin contracted 280 basis points to 29%.

The gaming industry is well known for increasing competition among a large number of participants. PENN Entertainment is continuously facing intense competition from various casinos, video lottery, gaming at taverns and other internet wagering services.

Key Picks

Some better-ranked stocks in the Zacks Consumer Discretionary sector are World Wrestling Entertainment, Inc. (WWE - Free Report) , Royal Caribbean Cruises Ltd. (RCL - Free Report) and Reservoir Media, Inc. (RSVR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today's Zacks #1 Rank stocks here.

World Wrestling Entertainment has a trailing four-quarter earnings surprise of 25.2%, on average. The stock has increased 43.7% in the past year.

The Zacks Consensus Estimate for WWE’s current financial year sales and earnings per share (EPS) indicates a rise of 4.9% and 10.7%, respectively, from the year-ago period’s estimated levels.

Royal Caribbean has a trailing four-quarter earnings surprise of negative 1.8%, on average. Shares of RCL have declined 32.5% in the past year.

The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 43.6% and 138.3%, respectively, from the year-ago period’s levels.

Reservoir Media has a long-term earnings growth rate of 17.5%. Shares of RSVR have declined 20.4% in the past year.

The Zacks Consensus Estimate for RSVR’s 2023 sales and EPS indicates a rise of 11.6% and 80%, respectively, from the year-ago period’s levels.

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