What’s in a name? For Penn National, which Thursday announced a rebranding to PENN Entertainment, the new moniker is more than cosmetic.
“Our new name maintains ties to our legacy, while better reflecting our evolution into North America’s leading provider of integrated entertainment, sports content, and casino-gaming experiences,” said CEO Jay Snowden during the operator’s second-quarter earnings presentation.
But investors and analysts are more interested in financials than name changes and during a question-and-answer session, Snowden and Executive Vice President/Chief Financial Officer Felicia Hendrix expressed confidence that PENN Entertainment is well positioned for future growth, despite a significant decrease in year-over-year net income, from $198.7 million in 2021 to $26.1 million this year, an 86.7% drop. Net revenue did increase by 5.2% from $1.5 billion in 2021 to $1.6 billion.
“Our three C’s – cardless, cashless, and contactless technology – and omnichannel engagement continued to drive our growth,” Snowden said.
Hendrix added that the second-quarter results are noteworthy in that they “comp against an all-time record high in second-quarter 2021,” she said. “And despite economic headwinds, our same-store revenues were down just 2.7% year over year and were up 3.5% sequentially.”
Snowden said that PENN Entertainment’s theme for the second quarter was “consistent performance and execution,” as the competitive environment remained stable. He cited early positive results from the launch of theScore Bet digital app in Ontario and PENN Game Studio’s ongoing development of Barstool Sports-branded content as reasons for optimism. PENN is also on track to open a Barstool Sportsbook at L’Auberge Baton Rouge in Louisiana this fall.
“Based on our ongoing success in Louisiana, we are optimistic about our upcoming sportsbook launches in Kansas and Ohio, where we have similar market-leading properties, bolstered by large casino databases,” Snowden said.
He added that recent legalization of sports betting in Massachusetts, the birthplace of Barstool Sports and to PENN’s Plainridge Park Casino, sets the stage for “another possible retail launch by the end of this year. And mobile wagering is anticipated in 2023.”
PENN Entertainment currently owns 36% of Barstool and is slated to acquire 100% of the company next year.
According to MarketWatch, PENN Entertainment stock fell 1.3% Thursday in pre-market trading after the “second-quarter profit that missed expectations, but revenue that topped, as rising expenses led to a drop in margins.”
Snowden said the media’s warning of a potential recession, “whether organic or a self-fulling prophecy,” creates a challenge in terms of modeling PENN’s business. But Snowden was confident the gaming company could navigate any slumps in the economy.
“We certainly have a lot of experience from dealing with the pandemic over the last two years,” he said, “and learning what levers can be pulled in case of an economic downturn.”
In an analyst’s statement, Joseph Greff of J.P. Morgan wrote, “PENN’s fundamentals remain healthy. … We now arrive at a new year-end-2022 price target of $41, down from our prior $53.”
“We like PENN’s value for patient investors and are maintaining our overweight rating and see too much pessimism baked into PENN (still),” Greff stated, “with decent value embedded in the shares (even on our below consensus forecast) and a stellar liquidity profile and balance sheet position.”
