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Investing.com -- Citizens upgraded Penn Entertainment to market outperform from market perform, saying years of heavy spending on online betting appear close to paying off and that a string of near-term catalysts could lift the stock about 38%.
The brokerage set a $24 price target, valuing the casino and sports-betting operator at 5.7 times its 2026 forecast for EBITDA, and 9.5 times projected free cash flow.
Penn’s shares have slid 87 % from their 2021 peak, but Citizens said the company is approaching an inflection point after “overpromising and underdelivering” while shouldering a bloated cost base.
“Not out of the woods, but catalysts are now real,” the note said.
Among them are four brick-and-mortar casino projects due to open over the coming months, which Citizens estimates will add about $70 million of EBITDAR in 2026 and help cut lease-adjusted leverage to 5.0 times by year-end 2026 from 8.6 times in the third quarter of 2024.
Citizens assigns little value to Penn’s digital arm for now, forecasting online EBITDA of $24 million in 2026. But the analysts argue that the ESPN Bet partnership could be renegotiated or abandoned when an opt-out window opens in August 2026, potentially freeing $150 million a year in fees.
“Sports betting is creating a material drag on earnings, and every $100 million of cost savings represents $7/ps beyond our price target,” the note said.
Penn also stands to receive cash from landlord Gaming & Leisure Properties (NASDAQ:GLPI) once its new casinos are operational, giving the company room to resume share buybacks as capital spending returns to normal levels, Citizens added.
Shares of Penn were up around 4% at $18.9 on Thursday trading. The stock a 15% free-cash-flow yield, according to the brokerage.