Citizens upgrades Penn on turnaround, cost relief hopes; sees 38% upside on stock

Published 26/06/2025, 15:08
© Reuters.

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.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.