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On Monday, Mizuho (NYSE:MFG) Securities adjusted its valuation of PENN Entertainment Inc (NASDAQ:PENN), reducing the price target from $25.00 to $24.00. Despite this adjustment, the firm maintained its Outperform rating on the company’s stock. According to InvestingPro data, PENN’s stock currently trades at $15.64, having declined over 27% in the past six months. The stock’s broader analyst targets range from $16.50 to $30.00, suggesting potential upside from current levels. The decision followed a review of PENN’s first quarter earnings, which aligned closely with Mizuho’s projections. The reported property EBITDA of $457 million matched the firm’s estimate and was slightly below the general market expectation of $463 million. InvestingPro analysis reveals that PENN operates with a significant debt burden, with a debt-to-equity ratio of 3.93. However, analysts predict the company will return to profitability this year, with an EPS forecast of $0.65 for 2025.
PENN’s interactive segment performed as anticipated, including a $10 million impact from unfavorable hold, which is the amount of money kept by the gaming entity after all bets are settled. The results, showing an impressive year-over-year EBITDA increase—$71 million in revenue driving $107 million in EBITDA—were perceived as better than expected. This strong performance, coupled with consistent results from the first quarter, has provided a positive outlook for the company.
The analyst’s commentary highlighted several factors that could contribute to PENN’s stock performance in the near future. The absence of guidance revisions and the observed improvement in trends for April and May suggest that the initial fears regarding the company’s performance may have been overstated. Additionally, potential changes in tax legislation could positively influence consumer spending in the second half of the year, which is not currently reflected in investor sentiment.
The analyst from Mizuho also pointed out the potential for growth in PENN’s interactive and strategic opportunities (SOP) as reasons to maintain the Outperform rating. Despite the slight decrease in the price target to $24, the overall assessment of the company’s prospects remains positive, with expectations of a gradual increase in the stock’s value. The company’s revenue grew by 5.51% in the last twelve months, and InvestingPro analysis indicates further growth potential, with revenue expected to increase by 6% in 2025. For deeper insights into PENN’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, PENN Entertainment reported its financial results for Q1 2025, missing earnings expectations with an EPS of -$0.25, below the forecasted -$0.19. The company’s revenue also fell short, coming in at $1.67 billion against a $1.71 billion forecast. Despite these setbacks, the company showed strength in its retail segment, generating $1.4 billion in revenue, and noted improvements in its Interactive division. Macquarie’s Chad Beynon revised the price target for PENN to $24 from $26, maintaining an Outperform rating, acknowledging that PENN’s first-quarter EBITDAR of $329 million fell short of consensus estimates by 6%. Management reaffirmed their 2025 retail EBITDAR guidance of $1.85-1.95 billion, despite reducing revenue and EBITDA projections for the Interactive segment due to unfavorable sports outcomes.
The company’s development projects, including four new ventures, are reported to be on track, with expected openings between the fourth quarter of 2025 and the first half of 2026. 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. PENN’s management noted that gaming volumes rebounded in March, a trend that persisted into May, with April experiencing a growth of 2% year-over-year. Looking ahead, PENN Entertainment expects continued improvements in its Interactive segment, targeting positive EBITDA by Q4 2025 and full profitability in 2026. The company plans to expand its digital offerings through its partnership with ESPN and is monitoring potential iGaming opportunities in Ohio.
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