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On Thursday, Macquarie’s Chad Beynon revised the price target for PENN Entertainment Inc (NASDAQ: PENN) to $24 from the previous $26, while maintaining an Outperform rating on the company’s stock. Currently trading at $15.28, PENN shows mixed signals according to InvestingPro data, with a market cap of $2.3 billion and significant volatility in its stock price. Beynon’s analysis acknowledged that PENN’s first-quarter EBITDAR of $329 million, which marked a 28% increase year-over-year, fell short of consensus estimates by 6%. This shortfall was attributed primarily to $8 million in corporate legal fees. Additionally, land-based EBITDAR saw a 5% year-over-year decrease, coming in 1% below consensus, and Interactive losses tallied at $89 million, which was 2% higher than expected.[Get access to 12 exclusive InvestingPro Tips and comprehensive analysis for PENN Entertainment through InvestingPro]
Beynon noted that the first-quarter results could have been stronger if not for a $10 million impact from adverse weather conditions in January and February, coupled with a lower-than-expected hold from March Madness. On a positive note, management highlighted that gaming volumes saw a rebound in March, a trend that persisted into May, with April experiencing a growth of 2% year-over-year. Management also reaffirmed their 2025 retail EBITDAR guidance of $1.85-1.95 billion. However, revenue and EBITDA projections for Interactive were reduced by $15 million and $10 million, respectively, due to unfavorable sports outcomes.
The company’s development projects, which include four new ventures, are reported to be on track, with expected openings between the fourth quarter of 2025 and the first half of 2026. Additionally, plans for a new land-based Hollywood Casino (EPA:CASP) in Iowa are underway, aiming to replace the existing riverboat casino at an estimated cost of $180-200 million.
Over the past two years, PENN’s stock has declined by 40%, with a particularly sharp 23.3% drop in the last six months according to InvestingPro data. This trend is driven by factors such as unimpressive financial performance, competitive openings, pressure on low-end consumers, high operating leverage, rising interest rates, and changes in Interactive strategy. The company operates with a significant debt burden, with a debt-to-equity ratio of 3.93 and total debt of $11.2 billion. Beynon predicts that by the end of the year, PENN will be in a position to aggressively repurchase shares due to reduced capital expenditures and returns on projects. Despite a low digital market share, further integrations with ESPN and the rollout of a standalone iCasino app are expected to significantly boost market share and contribute to a projected $500 million+ digital EBITDA improvement in 2026 over 2024. This, Beynon suggests, will compel investors to acknowledge the free cash flow and equity value in the shares. Free cash flow per share is expected to hit $2 in 2026 and $3 in 2027, according to the analyst. Currently, analysts maintain a moderate buy consensus with a high target of $30, suggesting significant upside potential.[Discover detailed financial analysis and growth projections for PENN and 1,400+ other stocks with InvestingPro’s comprehensive research reports]
In other recent news, PENN Entertainment reported its Q1 2025 financial results, missing both earnings and revenue forecasts. The company posted an earnings per share (EPS) of -$0.25, below the expected -$0.19, while revenue reached $1.67 billion, falling short of the anticipated $1.71 billion. Despite these challenges, PENN Entertainment’s retail segment remained strong, contributing $1.4 billion in revenue, and the Interactive division showed significant year-over-year improvements. The company maintains a liquidity of $1.5 billion, with cash and cash equivalents amounting to $592 million. Looking ahead, PENN Entertainment anticipates positive EBITDA in its Interactive segment by Q4 2025 and full profitability in 2026, supported by its partnership with ESPN. The company is also planning a new land-based Hollywood Casino in Council Bluffs, Iowa, to replace an aging riverboat, with construction expected to take 18 to 24 months. Additionally, the company is monitoring potential iGaming opportunities in Ohio.
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