On Thursday, Morgan Stanley (NYSE:MS) maintained its Equalweight rating and $19.00 stock price target for PENN Entertainment Inc (NASDAQ: PENN). The firm's analyst noted that PENN's third-quarter 2024 results aligned with previously announced expectations.
The company experienced challenges in its retail segment but demonstrated improved cost management within its digital operations. The third quarter saw earnings before interest, taxes, depreciation, and amortization (EBITDA) at $348.4 million, a year-over-year decrease of 22%, matching Morgan Stanley's and consensus estimates.
Retail revenues fell by 2% year-over-year, with EBITDAR down 9.9%, both showing a sequential decline due to unfavorable hold and extreme weather conditions. However, the fourth quarter is reportedly off to a stronger start in the retail sector.
The Interactive segment reported an EBITDA loss of $90.9 million, slightly outperforming Morgan Stanley's and consensus expectations of $95.6 million and $98 million losses, respectively, and staying within the lower end of the range forecasted by management.
Management highlighted the increased value per customer from newly renovated rooms and confirmed that four development projects, including Hollywood Joliet, are on budget and on track to open early in the second half of 2025.
Moreover, PENN Entertainment launched a significant initiative on October 30th, enabling account linking between ESPN Bet and ESPN. The company is also preparing to introduce a standalone iCasino in the first quarter of 2025. These developments are part of PENN's strategy to evaluate and expand its potential in the digital segment.
In other recent news, Penn Entertainment Inc. reported a mixed third-quarter performance, with earnings per share slightly surpassing analyst expectations, while revenue fell short. The company recorded a loss of $0.25 per share, marginally better than the predicted $0.26 per share loss, and revenue of $1.64 billion, missing the consensus forecast of $1.66 billion.
Barclays (LON:BARC) reaffirmed its Overweight rating on PENN Entertainment with a steady price target of $22.00. The company's adjusted EBITDAR reached $348 million, and the quarterly report noted a sequential improvement in online sports betting handle. Furthermore, retail slot volumes rose by 3.6% in the initial five weeks of the fourth quarter.
Penn Entertainment's retail business experienced stable consumer demand, but outcomes were influenced by unfavorable hold in the Northeast segment and volume decreases in the South due to severe weather and accelerated hotel remodeling. The company ended Q3 with $834 million in cash and cash equivalents. These are some of the recent developments in the company.
InvestingPro Insights
PENN Entertainment's recent financial performance and strategic initiatives, as highlighted in Morgan Stanley's analysis, can be further contextualized with real-time data from InvestingPro. The company's market capitalization stands at $2.88 billion, reflecting its current position in the gaming industry.
Despite the challenges in the retail segment noted in the report, PENN's revenue for the last twelve months as of Q2 2024 reached $6.28 billion, although this represents a revenue growth decline of 4.18% over the same period.
InvestingPro Tips provide additional insights into PENN's financial situation. The company operates with a significant debt burden, which aligns with the capital-intensive nature of the gaming industry and the ongoing development projects mentioned in the article.
Moreover, PENN's stock price movements are quite volatile, which investors should consider in light of the company's recent performance and future initiatives like the ESPN Bet account linking and upcoming iCasino launch.
It's worth noting that analysts do not anticipate PENN to be profitable this year, which is consistent with the company's current focus on expansion and digital transformation. This perspective is supported by the negative P/E ratio of -7.73 for the last twelve months as of Q2 2024, indicating recent losses.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into PENN Entertainment's financial health and market position.
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