Gambling stocks haven’t been so fortunate this yr. COVID-19 compelled a lot of the trade to quickly shut brick-and-mortar casinos, and a pause in dwell sports activities harm sports activities playing revenues significantly.
Regardless of all of this, Penn Nationwide Gaming (NASDAQ: PENN) appears to be like to be the strongest participant within the discipline. Its property are ideally positioned for the world we live in, and it is poised for an excellent bigger bull run than it is presently experiencing. Here is why.
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Penn’s casinos are having fun with a fast restoration
International on line casino operators like MGM Resorts Worldwide (NYSE: MGM) and Wynn Resorts (NASDAQ: WYNN) each rely considerably closely on air journey to convey clients to their properties. Penn doesn’t.
As a substitute, Penn Nationwide’s portfolio of properties is totally regional and subsequently generates a a lot bigger portion of demand from drive-to quite than fly-to site visitors. With COVID-19 nonetheless inflicting important ache on the aviation trade, this obvious lack of dependence on air journey is good. What has it meant for Penn?
In its most up-to-date quarter, the corporate posted its best-ever earnings earlier than curiosity, taxes, depreciation, amortization, and lease (EBITDAR), in addition to a report EBITDAR margin. Moreover, internet revenue rose by 223% yr over yr to $141.2 million. Regardless of occupancy restrictions and a few properties nonetheless not being open, Penn was capable of quickly develop its profitability, thus demonstrating the enchantment of its regional area of interest.
This sturdy revenue efficiency has prompted analysts to precipitously elevate earnings estimates for this yr and subsequent yr over the previous a number of months.
How are MGM and Wynn doing comparatively? Each noticed EBITDAR margins and revenue shrink significantly throughout the identical time interval. Moreover, earnings estimates are falling for MGM and Wynn, whereas Penn enjoys the alternative. It seems as if the regional playing trade is about for a faster restoration — and that’s nice information for Penn.
The right sports activities playing accomplice
A sports activities playing wave has hit america. Within the final two years, 22 states (and Washington D.C.) have legalized sports activities playing. Each single new poll initiative this yr additionally handed convincingly. To seize this shortly altering trade, Penn bought 36% of Barstool Sports activities at a $450 million valuation earlier this yr, with choices to purchase as much as 50% of the corporate.
Barstool Sports activities brings 29 million month-to-month energetic customers who additionally gamble on sports activities weekly. Its social media accounts boast tens of thousands and thousands of followers, and the corporate hosts three of the nation’s high 100 podcasts.
Collectively, the duo launched Barstool Sportsbook within the state of Pennsylvania final month. The early outcomes have been very encouraging. The app surpassed each single competitor’s opening weekend downloads, and did so with nearly zero exterior advertising and marketing from Penn. Clearly, Barstool followers have been prepared for this product.
What’s much more outstanding about this accomplishment is that the product is barely dwell in Pennsylvania, whereas competing merchandise are supplied in lots of extra states. Based mostly on success in Pennsylvania, Penn plans to debut the product in Michigan this quarter earlier than introducing it elsewhere. Barstool’s built-in, large, cult-like following is really thrilling for Penn to leverage — it is starting to play out.
Past digital sportsbooks, Barstool supplies much more enjoyable potentialities for Penn Nationwide Gaming.
The mixed entity plans to launch stand-alone Barstool-branded leisure locations in dense city areas. Based mostly on the eagerness and measurement of Barstool’s following, it is simple to see how this might do very properly additionally. Moreover, Barstool’s prospects as a media firm have by no means appeared brighter. Regardless of all of the sports activities cancellations this yr, it’s having its finest and most worthwhile yr to this point.
Penn is the playing stock to guess on
Penn Nationwide Gaming is ideally positioned to endure the worst of COVID-19. Its regional casinos are quickly recovering, and its return to profitability simply beat rivals like MGM and Wynn.
The long-term image appears to be like equally vibrant with Barstool Sports activities at Penn’s facet to energy new vitality, consideration, and progress going ahead. Regardless of the way you take a look at it, Penn is primed to win, and buyers ought to take word.
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Bradley Freeman owns shares of Penn Nationwide Gaming. The Fintech Zoom has no place in any of the stocks talked about. The Fintech Zoom has a disclosure coverage.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.