Why BofA Is Bullish On Wynn, Penn National Despite The Pandemic's Impact On Casinos

Wynn Resorts Ltd. WYNN and Penn National Gaming Inc. PENN reported worse-than-expected results Thursday in an illustration of the pandemic's effect on the casino sector. 

With closed resorts and travel restrictions through 2020, Wynn Resorts bore the brunt of the pandemic in its revenue.

Penn, on the other hand, was partially saved by its Barstool Sports brand as customers moved online to get their gambling fix.

Despite both company’s earnings missing expectations, analysts from BofA Securities weighed in on the reports and see a positive year ahead. 

Wynn Resorts: Wynn’s fourth-quarter sales came in at $686 million, falling far below the Street's estimate of $722.3 million.

Its adjusted EPS of $2.45 also missed the $2.31 estimate.

BofA's Shawn Kelley has a positive view on the company moving forward, however, as the analyst said “pent-up casino and convention” demand will arrive as the economy reopens in the second quarter of 2021.

Wynn has the potential in the form of gaining market share from Las Vegas Sands Corp. LVS in Macau and in the ramp-up of its property in Boston, he said. 

Wynn’s online sports betting app is a big win for the company going forward, as it continues to launch the app in new states and continues to invest in its technology, Kelley said. 

BofA reiterated a Buy rating on Wynn and maintained a $122 price target. 

Penn National Gaming: Penn reported revenue of $1.09 billion for the fourth quarter, missing the Street estimate of $1.09 billion and missing on adjusted EPS by 16 cents.

Rather than focusing on the loss due to casino closures, Kelley highlighted Penn’s growth in the Barstool interactive segment of its portfolio, for which the analyst said he sees “sees attractive network effects and upside to growth/market share as they reinvest and open new states.”

Barstool took in $27.5 million in its first 10 days after launching in Michigan, Kelley said, adding that this demonstrates that it took meaningful market share in the state.

Penn will see another strong market in Illinois when it launches the Barstool app in the state before March Madness, the analyst said. 

BofA reiterated a Buy rating on Penn National and increased the price target from $115 to $131.