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On Thursday, Stifel analysts adjusted their outlook on PENN Entertainment Inc (NASDAQ: PENN), increasing the price target to $22 from the previous $21 while retaining a Hold rating on the stock. Currently trading at $20.39 with a market capitalization of $3.05 billion, InvestingPro analysis indicates the stock is fairly valued. The firm’s analysis pointed out that the fourth-quarter results for PENN showed that both Retail and Interactive Adjusted EBITDAR aligned with the expectations of the buy-side when normalized, though the company faces challenges with its significant debt burden of $11.3 billion. Furthermore, the fiscal year 2025 Retail guidance was set in line with forecasts, although the projected losses for Interactive were higher than the consensus, despite the revenue guidance suggesting continued market share growth in both Online Sports Betting (OSB) and iCasino.
The analysts acknowledged the challenges presented by the guidance miss but noted encouraging signs in the mean reversion of regional fundamentals toward pre-COVID algorithms. This trend is seen as positive and potentially underestimated, with the sum-of-the-parts (SOTP) Retail multiples likely still below the cycle average. With annual revenue of $6.3 billion and an EBITDA of $417.9 million, the company’s financial metrics reveal both opportunities and challenges. InvestingPro data shows five analysts have revised their earnings downward for the upcoming period, adding context to the guidance concerns. The report also highlighted that disclosures and guidance for iCasino were incrementally positive, which should support Interactive valuation regardless of the final outcome with ESPN Bet. Management’s emphasis on discipline was noted as a significant point.
Stifel’s commentary suggested a growing optimism due to improving brick-and-mortar fundamentals in the regional market, a pivot point in iCasino, and the potential for unlocking SOTP value. Adjustments to the fiscal year 2025 and 2026 estimated Adjusted EBITDAR were made, decreasing by 5% and 3%, respectively. The revised price target reflects these considerations and the firm’s current stance on PENN stock. For deeper insights into PENN’s financial health, valuation metrics, and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.
In other recent news, PENN Entertainment reported its fourth-quarter 2024 earnings, which fell short of analysts’ expectations. The company announced an earnings per share (EPS) of -0.44, which missed the forecasted -0.29, and revenue came in at $1.4 billion, below the anticipated $1.69 billion. Despite these results, Canaccord Genuity maintained a Buy rating on PENN Entertainment, with a price target of $28, highlighting the potential growth from upcoming land-based projects and the Interactive segment’s move towards profitability. PENN Entertainment has set ambitious targets for 2025, with retail revenue guidance between $5.6 billion and $5.75 billion, and interactive revenue projected to be between $1.25 billion and $1.75 billion. The company is also progressing with its physical expansion plans, including the new Hollywood Casino (EPA:CASP) Joliet, expected to open in the fourth quarter of 2025. Management acknowledged slower-than-expected progress with its ESPN BET platform and indicated potential revisions to the Interactive segment’s cost structure if significant advancements are not achieved this year. Analysts from Canaccord Genuity underscored the appealing risk/reward profile for investors, given the company’s current valuation. Additionally, PENN plans to repurchase at least $350 million in shares and aims to achieve breakeven in its digital segment by the end of 2025.
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