As the sports betting and iGaming industry expands, gambling stocks continue to attract interest from investors.
We take a look at recent headlines surrounding Pennsylvania gambling stocks, and present insights from stock analyst Peter Reznicek.
Peter Reznicek is the founder of ShadowTrader.net and writer of Peter’s Premarket Perspective, a morning market profile blog to help people plan their trading day and organize their thoughts before the market opens. Reznicek will provide his insight on some of the headlines surrounding gambling stocks. He’s on Twitter and can be reached at [email protected]
Penn National Gaming stock “not healthy right now”
The “Most Dangerous Stocks Models Portfolio” recently included $PENN stock. Joseph N. Jaffoni, an investment advisor to Penn National Gaming, called it “irresponsible and misleading” and said the story makes no mention of the strength of Penn’s recent operating performance. Zacks Equity Research reported that $PENN is in oversold territory according to its RSI (relative stock index) reading of 28.37.
Reznicek says: Let’s look at the chart.
“Regardless of whether you believe the stock is overvalued or undervalued, it is clear from the price action that it is not healthy right now. There have been two earnings reports since the March 15 high (middle of chart) and price has not responded favorably at all to either of these releases. The 20 period moving average (green) and the 50 period moving average (red) have been pointing downward for months. And more recently it appears that even the 200 period (blue) is starting to roll over. The much slower 200 period average is a barometer of long term bias.
“Regardless of whether you believe the stock is overvalued or undervalued, it is clear from the price action that it is not healthy right now. There have been two earnings reports since the March 15 high (middle of chart) and price has not responded favorably at all to either of these releases. The 20 period moving average (green) and the 50 period moving average (red) have been pointing downward for months. And more recently it appears that even the 200 period (blue) is starting to roll over. The much slower 200 period average is a barometer of long term bias.“While it is true that RSI readings below 30 often indicate oversold territory, understand that the nature of indicators is that they are price driven and can remain in oversold readings for long periods of time. Generally, traders would be better off ignoring these indicators and relying more on trendlines (yellow dashed line) and moving average direction to gauge direction.”
$PENN named a top covered call play
Bank of America named Penn National Gaming as one of its ten best covered call plays.
Reznicek says:
“To speak to BOA naming PENN as a top covered call play, I would say “ok, maybe.” The ideal stocks for covered call plays have higher than average implied volatility in their options but also have charts that grind higher slowly from lower left to upper right. PENN satisfies the first criteria with options expiring 31 days out trading at 61.70% (which implies the potential for a 61.70% move in either direction on an annualized basis). But fails on the second criteria as the current trend is down and price is generally grinding lower. “
Fubo plans to launch a sportsbook; Is it a good buy?
Fubo Gaming ($FUBO) announced an agreement with the Cordish Companies which gives it access to Pennsylvania for sports betting and online casino. It plans to launch Fubo Sportsbook state-by-state in Q4 of 2021, pending regulatory approvals. Unlike the other sportsbooks in PA, Fubo plans to integrate the sportsbook into FuboTV for a watch-and-wager experience. On April 19, Fubo was $19.43. It closed on July 16 (after the announcement) at $25.90.
Reznicek says:
“FuboTV is still in a downtrend but has recently been improving quite a bit and is now starting to make some higher lows. I’ve circled the area around $30 where the stock will actually change trend back upwards. That would be a buy point for investors who are looking to take a long term position in the stock.”
What to look for as companies release Q2 2021 results
PlayPA: What are some of the key things you look for when a company, not just one in the gambling/sports betting space, releases its Q2 2021 results?
Reznicek says:
“If I’m in the long game, I want to see revenue growth from quarter to quarter, preferably in double-digits if it’s in the tech space. I also want to see an expansion of net income as well. Those are the basics that every fundamental investor should be expecting from their company. If any metrics are not moving in the right direction, then you want to find out if that situation is transitory or ongoing.
As a technical trader, I want to see the chart moving in the right direction. I want to see historically how it reacts to the releases of its numbers. Good news should be met with good price action. If it’s not, then there could be something going on under the hood that I need to find out about.”
Disclaimer: Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. This article is intended to provide information, not investment advice.
Lead image via Dreamstime.
