Casino and sports betting companies pen entertainment (NASDAQ:PENN) reported first-quarter financial results that fell short of analysts' expectations.
Here's what analysts are saying in response to the report:
- Needham analyst Bernie McTernan calls the stock a “buy” and lowers his price target from $32 to $26.
- JMP Securities analyst Jordan Bender has a market perform rating on the stock and has not set a price target.
- Mizuho analyst Ben Chaiken calls the stock a “buy” and raised his price target from $29 to $32.
- Trust analyst Barry Jonas rates the stock as a “buy” with a price target of $23.
- Benchmark analyst Mike Hickey has given the investment a “hold” rating and has not set a price target.
needham: McTernan said the interactive division had a negative impact on first-quarter results.
“Management expects customer revenue to improve next football season as they expect to benefit from continued product development, including enhanced integration with ESPN.”Disney veteran Aaron LaBarge Our recent hire as CTO will also help,” said McTernan.
The analyst said he has a “positive risk-reward bias in stocks.”
Penn expected ESPN Bet's per-customer spend and hold rate to be lower than expected for the quarter.
“This suggests either ESPN Bet customers are more casual compared to the industry, or ESPN Bet is a secondary app for consumers.”
Related Link: Penn Entertainment Upgraded After Analyst Disputes ESPNBET's Zero Rating
JMP SecuritiesBender said that the interactive division is weighing down PENN's performance and could lead to further losses.
“The outlook for PENN Entertainment's interactive division incorporates higher levels of losses,” Bender said. “We remain hesitant about the stock as losses in its online business continue to mount for an already highly leveraged company.”
The analyst said North Carolina's market share in April was in the mid-to-high single digits, and gaming margins for the month could translate into an increase in online sports betting market share for the month.
Mizuho: While others were concerned after the first-quarter results, Mr. Penn received a price target increase from Mr. Chaiken, with analysts saying the results were stronger than they appeared.
“We believe the weakness in stock prices reflects a divergence from expectations and a misunderstanding of underlying trends,” Chaiken said.
Pennsylvania's retail sector is performing well, he added, and investors may be overreacting to weather impacts and seasonality in the first quarter.
Chaiken says the interactive sector is undervalued. His recent CTO hire and product improvements come ahead of his upcoming NFL season.
“Interactive's expectations are below expectations, but the stock is probably priced at zero or negative value.”
Trustee: According to Jonas, the interactive division was responsible for the stock decline.
The analyst said the buy theory holds true.
“While the success of ESPN Bet could provide significant upside, we believe there is real unrealized value in Interactive outside of ESPN Bet,” Jonas said.
The analyst said ESPN Bet's metrics could improve with the new NFL season due to product improvements. The company also said it expects wager amounts and frequency to increase further as it expands its parlay offerings.
standard: Hickey said Hooray for the Penns is overhauling its ESPN betting platform before the next NFL season.
“ESPN Bet has underperformed in its parlay, same-game parlay and player prop offerings, lagging behind market leaders,” Hickey said.
Penn's efforts to strengthen the ESPN Bet platform could involve significant spending and reduced profitability. He said: “We are concerned that the platform may be missing a great offering in in-play betting, which is a key focus area for product innovation by major operators.”
“ESPN Bet focuses on where the puck has been, rather than predicting where the puck will go,” the analyst said, using a sports analogy.
“We remain optimistic regarding ESPN Bet’s ability to capture more than 10% of the OSB market.”
The analyst said reaching this level of success would require further capital investment, which could lead to lower stock prices.
PENN Price Action: Penn stock rose 0.83% to $15.12 on Friday, compared with a 52-week trading range of $13.50 to $29.38. Penn stock has fallen 50% over the past year.
Read next: Penn Entertainment Q4 Earnings Highlights: Revenue Miss, EPS Miss, Impact of ESPN Bets
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