On Tuesday, Penn National Gaming’s stock joined the “Most Dangerous Stocks Models Portfolio” list compiled by Forbes contributor David Trainer.
Trainer’s most condemning support beyond pointing to what he summed up as “poor fundamentals” was an inflated $PENN share price.
The stock opened the trading day Tuesday at $72.50 but that price should be halved, according to Trainer.
$PENN stock worth just $34 a share, according to Forbes
Trainer, who is the founder and CEO of a company called New Constructs that uses robot analytics, wrote:
“The stock is worth just $34/share today – a 53% downside to the current stock price.”
Penn shares have had a wild ride.
The stock briefly surpassed $140 a share earlier this year. It was listed at just more than $4 a share in March 2020, after COVID-19 closed down casinos.
At about the same time as the top of the market, corporate leaders Jay Snowden, the CEO, and Peter Carlino, the son of the founder, each sold large chunks of the stock. Snowden sold more than $10 million in shares and Carlino more than $300 million.
An investment spokesman for Penn called Forbes story ‘click-bait’
Joseph N. Jaffoni, an investment advisor to Penn, discounted the Forbes story when Playin Pennsylvania reached out for comment.
Late in the day on Tuesday, Jaffoni labeled the Forbes piece “irresponsible and misleading.”
Jaffoni shared with Playin Pennsylvania a rebuttal to Trainer’s $PENN stock analysis:
“There’s no deteriorating fundamentals at PENN – on the contrary. This story makes no mention of the strength of PENN’s recent operating performance.
“PENN pre-announced Q221, with revenues expected to be $1,450mn-$1,555 million (+14% vs. 2019) and adjusted EBITDAR [earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs] expected to be $540mn-$580 million (38% vs. 2019).
“Forbes also makes no reference to PENN’s standing as the best operator in the gaming industry as they have consistently generated the highest tax adjusted margins in the industry – and they’re still rising!”
Jaffoni also said that the comparison used by Trainer discredits the entire story, and that “comparing 2016 to a pandemic year is absurd.”
He also faulted the Forbes piece for not mentioning the partial acquisition of Barstool Sports, the company’s healthy balance sheet, strong management and operating teams, and a track record of creating shareholder value that outpaced returns from the Dow, NASDAQ, and S&P 500 during the same period.
July 15 update: Rating company Standard & Poors has now said Penn “has improved its revenue at a faster-than-expected pace over the last several months amid the relaxation of COVID-19-related capacity restrictions. The combination of stronger-than-forecast revenue and the cost reductions management implemented during the pandemic, is supporting healthy EBITDA growth and a faster-than-anticipated improvement in the company’s credit measures.”
Investors Business Daily also wrote negatively about Penn shares
On the same day as the Forbes story, an Investors Business Daily writer cautioned:
“Bottom line: Penn stock is not a buy as it is not in a buy zone while falling below key benchmarks, the 50-day and 10-week lines. While the stock is not yet flashing clear sell signals, investors should take note.“
Additionally, the IBD story warned:
“While the company is making a profit again, strong sustained growth hasn’t returned yet.”
Jaffoni did not comment on the IBD story.
On a positive note, the IBD story pointed to Barstool Sportsbook:
“Barstool now has more than 400,000 customers and generated over $660 million and $61 million in handle and gaming revenue, respectively. The company plans to roll out Barstool in eight states by football season and in at least 10 states before the end of the year.”
Penn owns a 36% share of Barstool and is rebranding its sports lounges to match the popular sports media name. The first retail Barstool sports betting lounge on the East Coast is set for opening this August.
Penn is opening a third PA casino in August
The sharply negative stories came on the heels of Penn’s upbeat announcement Monday that it would open a third PA casino, Hollywood Casino York, on Aug.12.
Penn also plans to open a fourth casino off the Morgantown exit of the PA Turnpike before the end of the year.
The company was added to the S&P 500 in late March and has its Q2 earnings call set for Aug. 5 at 9 a.m. Analysts participating in the call are generally remarkably upbeat.
We’ll see if that holds true.
For more on the history of Penn National, see our three-part series on the rise of the Wyomissing, PA-based gambling company.
- The early years from 1969 to 2005
- Middle years of growth from 2006 to 2018
- A company refocus to online gambling from 2019 to the present
Lead image via Dreamstime.
