Penn National Gaming: Why This Analyst is Bullish

Penn National Gaming Inc.'s PENN stake in Barstool Sports is listed as a major catalyst by an analyst offering a take on the U.S. sports betting market. 

The Penn National Analyst: Needham analyst Bernie McTernan initiated Penn National Gaming with a Buy rating and a $151 price target with a bull case price target of $350.

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The Analyst Takeaways: Penn National has a compelling risk/reward according to the analyst. McTernan sees the U.S. online sports betting and iGaming market worth $32 billion.

“(We) see the potential for PENN to take significant, profitable market share on the strength of Barstool’s differentiated content-driven customer acquisition strategy,” McTernan said.

Online sports betting could be in its infancy in the U.S. with only 25% of the population having access and 10% to iGaming. Regulation in new states could help grow the market access for companies like Penn National.

“We see PENN gaining access to nearly half of the population in ’23 on its way to 65% by ’25,” he said.

Penn National’s ownership stake in Barstool Sports is seen as a catalyst for it to work with media companies.

“Barstool has fully embraced sports betting and we believe it has the potential to be the leading sports betting media company in the U.S. as its strong demographic overlap with sports bettors allows it to engage with them on social media platforms leading to OSB share gains,” the analyst noted.

McTernan believes Barstool Sportsbook, the company's sports betting app, can achieve a 15% market share for online sports betting in the U.S., ranking third behind Draftkings Inc DKNG and FanDuel.

“PENN spends significantly less than peers on external marketing,” he added.

Penn National has an opportunity to gain customers from its physical casinos and Barstool Sports users in states where online sports betting is legal.

Price Action: Shares of Penn National are up 5% to $94.60 on Tuesday.

(Photo: Erik McLean via Unsplash)