It was terrible news for casino stock Penn National Gaming (NASDAQ:PENN) this morning after it released its earnings report. The news proved a catastrophe as investors cashed in their collective chips and took nearly 13% of Penn’s market cap with them in Thursday morning’s trading.
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The basic numbers were bad enough on their own. Penn posted a non-GAAP earnings per share figure of -$1.75. Analysts were expecting a loss, but nowhere near so pronounced; the analyst consensus looked for -$0.57.
It got worse from there; Penn posted revenue of $1.4 billion. That by itself wouldn’t be bad news. In fact, that number would be welcome at many companies. But for Penn National, it was another disaster, as it was short of analyst projections calling for $1.53 billion. It also represented an 11.9% shortfall against the fourth quarter of 2022.
Fueling an Expansion Takes Resources
Much of the problem stems back to Penn’s recent investment in ESPN Bet. Revenue may have been down—mainly through the Northeast and South segments—but the West and the Midwest were both on the rise. However, the Interactive segment slipped considerably, fueled by a rebranding of Barstool. It also put a lot into ESPN Bet, but Penn expects that investment to make up for lost time in a big way once North Carolina and New York come into play. Penn reported “…tremendous download volumes…” from the app’s launch and ultimately looks for ESPN Bet to reach about 46% of the online sports betting market.
Is Penn National a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PENN stock based on four Buys and nine Holds assigned in the past three months, as indicated by the graphic below. After a 39.26% loss in its share price over the past year, the average PENN price target of $29.08 per share implies 47.88% upside potential.
