Wall Street Bets: Penn Entertainment, New Jersey sports betting, Macau gaming

June 17, 2024 1:59 PM
Photo: CDC Gaming Reports
  • Rege Behe, CDC Gaming Reports
June 17, 2024 1:59 PM
  • Rege Behe, CDC Gaming Reports

Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.

Penn Entertainment

Penn Entertainment’s ongoing situation, with shares spiking after  a letter from an activist investor, continues to draw attention from Wall Street.

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Truist Securities analyst Barry Jonas June 14 wrote about meeting Penn’s management and being “generally encouraged by commentary. Quarter-to-date state-reported land-based GGR is trending better as April weakness improved in May (mostly calendar-driven). We don’t have great visibility on June yet, but modestly lower Q2E EBITDAR -1% on conservatism (with no change to FY24E where we are midpoint of the guide). We make no changes to our interactive estimates. We increase our price target to $25 from $23 (now ~6.5x 2025E retail EBITDAR plus +$7 for other interactive businesses). The shares have risen as activists have become more vocal.

“After two straight misses and guide lowerings, we think management is hyper-focused on meeting if not beating expectations – specifically interactive. ESPN Bet integrations appear on track with a lot riding on football season. As we outlined in our recent upgrade (and now supported by activist letters), we think the market is undervaluing the company. Aside from any ESPN Bet successes driving material upside, we think the market isn’t giving much (if any) credit for the non-ESPN Bet components of the Digital segment.”

Jefferies analyst David Katz, in a June 16 note, wrote that “Penn remains the most active name in our coverage given Boyd’s recent board appointment and the ongoing commentary from management and other entities presumed to be contemplating an offer following the public activist commentary. The focus continues to be on the complexities of what’s next for Penn and prospective alternatives for driving higher value.”

New Jersey sports betting

Analyst Joseph Greff of J.P. Morgan, in an overview of New Jersey gaming revenue in May, noted sports betting revenue was down 4% year-over-year to $78.8 million on handle of $839 million, an 8% increase.

“Aggregate win rate for the month was 9.4%, down 120 basis points year-over-year. In terms of market share for the top operators, FanDuel took the top spot at $36.7 million (47% share), followed by DraftKings at $22.1 million (28% share), BetMGM at $5.6 million (7% share), Caesars at $3.0 million (4% share), and ESPN BET at $2.6 million (3% share). We note Fanatics GGR share dropped to 2%, from 31% in April, which we suspect was driven by lower VIP action.”

Macau gaming

Jefferies’ David Katz also looked at Macau gaming in a June 17 note:

“According to our industry sources and checks, Macau’s gaming revenue for six days ending 16 June slowed to MOP533 million/day,” Katz wrote. “This was weaker than MOP650 million/day during June 1-10, but to some degree had been expected, given: 1) first 10 days of June included two weekends with the second weekend a three-day holiday; 2) post-holiday seasonal slowdown; 3) recent suspension of free food and drinks service; and 4) start of the Euro 2024 tournament.

“Given the full-month expectation is lower than the previous guidance (MOP570-630 million/day), industry expectations for the remaining days of the month are reduced to MOP530-610 million.”