Penn Entertainment stock dropped following Bank of America's downgrade to "neutral" with a $22 price target. Analyst Shaun Kelley cited several concerns impacting the company's outlook.

Key factors behind the downgrade:

• Increased competition in Midwest markets and Louisiana
• Expected revenue and margin pressure from new casino supply
• High capital expenditure of $850M for upcoming projects
• Rising debt leverage projected to reach 6.3x in 2025
• Weak market share for ESPN Bet (3% in sports wagering, 2% in iGaming)

Recent developments:

• Stock gained 9.70% since Election Day
• Nearly 14% increase over the past month
• Year-to-date loss reduced to under 19%
• Major investments include $360M for Aurora casino relocation and $185M for Joliet facility

Positive indicators:

• Company moving past peak leverage and losses
• Balance sheet expected to strengthen through 2025-2026
• ESPN Bet showing technological improvements
• Potential for improved customer acquisition

The downgrade suggests a balanced risk-reward profile, with ongoing concerns about regional casino earnings, fixed costs, and market share challenges offsetting recent stock performance gains.

Related Articles

Previous Articles