Penn National Gaming Stock Offers Epic Upside Potential, Says Bank of America

Posted on: March 17, 2021, 09:56h. 

Last updated on: July 5, 2021, 08:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Penn National Gaming (NASDAQ:PENN) stock jas earned another big endorsement from Bank of America (BofA). The banking giant highlights innovation with the Barstool Sports business and the possibility of mergers and acquisitions as an avenue for adding new customers.

Penn National stock
From left, Penn National CEO Jay Snowden, Barstool CEO Erika Nardini, and founder David Portnoy. Bank of America is impressed following a meeting with the trio. (Image: Reading Eagle)

Last Friday, S&P Dow Jones said it’s adding the regional gaming company to the S&P 500 on March 22. This news sparked a brief rally in the stock, sending it to an all-time high of $142 on Monday. The shares subsequently retreated and trade around $119 at this writing. Still, following a meeting with Penn CEO Jay Snowden, Barstool CEO Erika Nardini, and founder David Portnoy, BofA remains enthusiastic about the stock.

Barstool continues to innovate in its core media business with a focus on its deeply loyal 21-40 year old audience,” said the bank.

“This will translate into continued experimentation with new content, personalities, and platforms to serve its audiences’ changing needs/desires. It is always pushing towards new platforms and where users want to engage (TikTok, Clubhouse, OnlyFans) and is not wedded to established channels.”

In January 2020, Penn announced it was doling out $163 million in cash and stock to purchase a 36 percent chunk of Barstool Sports, with an option to own Portnoy’s sports media and pop culture site outright for $450 million.

Deal Paying Dividends for Penn Stock

When the gaming company initially revealed the arrangement with Barstool, some on Wall Street expressed concern that the casino operator was paying too much simply to garner a media partner.

Since then, however, some gaming operators have shelled out more for media teammates, and with internet gaming, media, and sports now intimately linked, market observers see those partnerships generating $30 billion in revenue by 2030. Specific to Penn stock, it’s up nearly 3,100 percent from its March 2020 low, indicating the accord with Barstool is delivering the goods for investors.

BofA sees more room for growth, as Barstool further leverages its audience with streaming and push to video technologies.

The bank adds mergers and acquisitions are possible for Penn as the third phase of customer acquisition, though it doesn’t mention specific takeover candidates. The casino operator has been tied to some deal speculation as of late, but it hasn’t commented on specific chatter. One thing is clear: Should Penn pursue a purchase, it could use its high-flying stock as currency.

Barstool Sportsbook Update

The cornerstone of the Penn/Barstool marriage is branding. The gaming company’s retail and online sportsbooks bear the Barstool name — a strategy that’s already paying off.

BofA says the company has about a 15 percent share in the markets in which Barstool Sportsbook is operational, with the bulk of that attributable to the brand’s core audience, meaning there’s room for growth.

“Upside can come from 1) better activation of more casual Barstool consumers/users, 2) cross-sell with nascent iGaming offerings, 3) PENN’s mychoice loyalty database, and 4) targeted regional marketing,” said BofA.

The betting app is live in Illinois, Michigan, and Pennsylvania.