Due in large part to heavier-than-expected igaming losses engendered by ESPN Bet promotional activity, J.P. Morgan analyst Joseph Greff lowered his fourth-quarter projections for Penn Entertainment. Also to blame for the pullback were lower-than-anticipated gambling revenues from Penn’s large network of regional casinos.
Greff shaved $57 million off his cash-flow projection for October through December 2023, bringing it down to $258 million. The Wall Street consensus for Penn’s fourth quarter is $290 million.
Expecting “more modest [gross gaming revenue] top-line growth,” Greff modified his projections for 2024 and 2025 as well, trimming two percent off each target.
The analyst called Penn’s current trading value, 7.3 times cash flow, “undemanding and appealing … specifically if ESPN BET can help create incremental equity value per share.”
However, Greff was taking a wait-and-see attitude on the online-sports-betting marketplace and the “generally more encouraging than not OSB market share gains since [Penn’s] November 14 launch of ESPN BET. The medium/long-term success of ESPN BET is likely biggest driver of the stock in the foreseeable future.”
Greff kept a “Neutral” rating on Penn stock, which was trading at $23.72 at the time of his Friday report. His price target remained at $26 per share.
