On Monday, Mizuho Securities adjusted its outlook on shares of PENN Entertainment Inc (NASDAQ: PENN), reducing the price target to $25 from the previous $32, while still maintaining an Outperform rating on the company's stock. This adjustment comes after a period of investor skepticism and a significant share price movement since the first quarter of the year.
The firm initially recommended PENN Entertainment with an Outperform rating in March, citing the potential for positive shifts in regional gaming trends. Still, the subsequent investor sentiment has been largely negative, with pushback against the firm's earlier position, including what was perceived as an overreaction to a first-quarter sell-off.
The rationale behind the original rating was based on the potential for growth in PENN's land-based operations and the possibility of benefiting from a partnership with ESPN BET. However, with the company's shares trading around $20 recently, Mizuho now believes that this valuation fully accounts for the core business, suggesting that further stock price increases would require a significant uptick in online sports betting (OSB).
Mizuho's revised price target reflects a more conservative earnings multiple and slightly lower estimates than previously projected. The firm anticipates that PENN's shares may experience short-term fluctuations, with the possibility of remaining within a certain range, barring any major mergers and acquisitions activity. Despite the lowered price target, Mizuho continues to see the stock favorably with an Outperform rating.
In other recent news, Penn National Gaming (NASDAQ:PENN) has seen a flurry of analyst activity. Raymond James has downgraded the company's shares from Outperform to Market Perform, citing uncertainties surrounding the profitability of its digital operations.
Concurrently, Craig-Hallum upgraded the company's stock from Hold to Buy, setting a new price target of $30.00, citing the value of Penn National Gaming's assets and favorable market conditions.
Truist Securities increased their price target for Penn National Gaming to $25, noting an upward trend in the company's land-based Gross Gaming Revenue (GGR). However, due to uncertainty, Truist Securities slightly lowered its second-quarter EBITDAR estimates.
Stifel maintained its Hold rating and $19.00 stock price target for Penn National Gaming, acknowledging ongoing investor concerns about the company's increasing losses in its Interactive segment.
Raymond James initiated coverage on the company with an Outperform rating and a share price target of $20.00. Needham also maintained its Buy rating and a $26.00 price target for Penn National Gaming, highlighting the company's successful collaboration with ESPN and technological strides. These recent developments provide investors with a diverse range of perspectives on the company's future performance.
InvestingPro Insights
In light of Mizuho Securities' updated outlook on PENN Entertainment Inc (NASDAQ: PENN), it's worth considering additional insights from InvestingPro. With a market capitalization of $2.77 billion, the data indicates that PENN operates with a significant debt burden and is not expected to be profitable this year, as reflected in a negative P/E ratio of -2.51. This aligns with the concerns leading to the reduction of the price target. The adjusted P/E ratio for the last twelve months as of Q1 2024 stands at -9.95, underscoring the company's challenges in achieving profitability.
The volatility in PENN's stock price movements is evident, with a 1-month total return of -6.61%, further justifying Mizuho's caution. Moreover, the company does not pay a dividend to shareholders, which may affect investor sentiment, especially among those seeking regular income streams. For investors looking for deeper analysis, there are additional InvestingPro Tips available that could provide more context on PENN's financial health and market position. Readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription for access to these valuable insights.
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