Penn National Q4 Results Impressed, But Analyst Has Reservations

Shares of William Penn National Gaming (NASDAQ:PENN) gained 1.79 percent lowest hebdomad after the regional gambling casino heavyweight posted fourth-quarter results that topped Wall Street estimates, but at to the lowest degree 1 analyst is taking a cautious draw close to the downtrodden stock.

In a take down to clients endure Friday, Roth Capital psychoanalyst Edward V Engel lowered his rating on William Penn to “neutral” and his toll point to $51, citing the potentiality for 2022 headwinds to emerge.

We downgrade PENN to Neutral, partly inwards response to 4Q21 results offering a less attractive 2022 outlook. While we remain bullish on PENN’s digital opportunity longer-term, we escort several negatively charged catalysts inward 2022 that could fret trust inwards its securities industry percentage trajectory,” said the analyst.

When Penn delivered results for the last trinity months of 2021 lowest Thursday, the caudex rallied after the operator said its digital gaming unit, including Barstool Sportsbook, performed ameliorate than expected. That enterprsise missed $6 one thousand thousand on revenue of $150 trillion inward the Oct through and through Dec 2021 period, while analysts calculate a loss of $20 billion on sales of $114 million. This year, Penn’s digital trading operations are expected to lose $50 million, well-below prior guidance calling for a loss of $80 million.

Devil’s in Guidance Details

Penn offered up 2022 guidance, locution it expects mesh revenue of $6.07 one million million to $6.39 one million million on earnings before interest, taxes, depreciation, amortization, and restructuring or charter costs (EBITDAR) of $1.85 billion to $1.95 billion.

While that’s a nice outlook and some analysts indicate fears near faltering revenue and perimeter eroding are mostly factored into Penn’s stock price, Engel notes it testament follow tricky to stay fresh margins steady as rising prices soars. He also mentions some potency market-specific issues William Penn could coming upon as 2022 unfolds.

“While sluttish 1Q comps offset printing a hard 2Q, we see downside risks from incremental cannibalization at foursome properties next twelvemonth (Bossier, Lake Charles, Council Bluffs and eastern United States Chicago),” adds the analyst.

Penn, the largest regional cassino operator inwards the US, derives substantial portions of its revenue from LA and the Midwest.

Cautious on William Penn Canada Opportunity, Too

Last August, Penn doled out $2 billion inward hard currency and equity to win Score Media and Gaming to get ahead a footing in Canada as that country legalized single-game sports wagering. Ontario, the country’s to the highest degree thickly settled province, is slated to open up the securities industry to buck private companies inwards April.

While that could follow a confirming for Penn, there are substantial competitive threats inward the forms of Bet365, Entain and Flutter, which are already operating inwards Canada’s gray market.

“These operators tin can also rationalize greater marketing spend, presumption exfoliation benefits from grayness market operations inwards contiguous provinces,” notes Engel.

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