Penn Pumped by Piper Sandler, Research Firm Sees $84 Stock

Posted on: November 21, 2020, 01:41h. 

Last updated on: November 21, 2020, 06:33h.

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

Penn National Gaming (NASDAQ:PENN) continues piling up positive commentary among Wall Street analysts, with Piper Sandler analyst Yung Kim hopping on board this week.

Barstool Sportsbook
Penn National’s Ameristar in Colorado, site of the first Barstool Sportsbook. An analyst sees big upside for the stock due to sports betting. (Image: Helen Richardson/Denver Post)

In new coverage of the regional gaming name and rising sports betting player, Kim tagged the Pennsylvania-based operator with an “outperform” rating and an $84 price target. That is one of the highest sell-side forecasts on the stock. Not surprisingly, the analyst’s bull thesis on Penn revolves largely around online casinos and sports wagering.

There are three levers here: percentage of US population living in a state with legal sports betting and/or igaming, average revenue per person in the state, and market share attained by competitors,” writes Kim in a note to clients.

Penn’s online sports betting is Barstool Sportsbook, named for the popular pop culture/sports media property the gaming company owns a 36 percent stake in. Currently, the mobile app is only available in Pennsylvania, and the operator is targeting a debut in Michigan in the coming months. While it was late to the Keystone State fray and it’s less than two months old, Barstool Sportsbook is one of the fastest-growing internet sports betting providers in that market.

Conservative Estimates

Wall Street growth forecasts for US sports betting are scattered. But even those on the low end highlight potentially lucrative opportunities with equities such as Penn National.

For his part, Piper Sandler’s Kim estimates the domestic sports wagering market will swell to $11 billion from $3 billion today, as 65 percent of the population gains access to the activity. The analyst separately values iGaming, another business Penn has exposure to, at $7 billion going forward.

Penn operates 41 casinos in 19 states, something Kim deems “an important competitive advantage.” That’s because that geographic diversity positions the company to capitalize as more states in which it has land-based venues approve internet gaming and sports wagering.

With a more extensive rollout of Barstool Sportsbook in 2021, Penn can take advantage of existing footprints in some of the fastest-growing online sports betting markets in the country, including Colorado, Illinois and Indiana, among others. Earlier this month, Penn said it’s opening the first brick-and-mortar Barstool sportsbook at its Ameristar Casino Resort Spa property in Black Hawk, Co. The company will eventually rebrand the bulk of its retail books with the Barstool name.

Promising Equity Action

Kim, the Piper Sandler analyst, calls Barstool Sportsbook a new revenue stream for Penn. The stock isn’t lacking for reasons for investors to bid it higher this year, and that’s exactly what they’re doing.

Up a jaw-dropping 1,763.47 from its March lows, Penn stock tacked on almost 10 percent for the trading week ending Nov. 20.

Kim’s price target of $84, which is nearly $10 above the Wall Street consensus, implies upside of about 20 percent from Friday’s close.