Boosted By Barstool, Penn National's Stock Passes MGM, $100 Share Price: So What's Next?

Sports betting continued to be a big story in 2020 even as the sporting world faced major disruptions with scheduling due to the COVID-19 pandemic.

What Happened: Thanks in part to its 30% ownership stake in Barstool Sports, shares of Penn National Gaming PENN were up over 230% in 2020. In fact, the stock passed the $100 per share mark for the first time on Monday.

Roundhill Investments Matias Dorta sums up the movement of Penn National over the last two years compared to rival MGM Resorts International MGM.

Jan 2019 $PENN:
• Regional Hotels & Casinos
• $2.8B Market Cap$MGM:
• Global Luxury Resorts & Casinos
• $15.3B MC

Jan 2021 $PENN:
• Regional Hotels & Casinos
• Owns Barstool & @BSSportsbook
• $15.8B MC$MGM:
• Global Luxury Resorts & Casinos
• $15.3B MC https://t.co/AsYvaXymW6

— Matias Dorta (@mattdorta) January 11, 2021

As of January 2019, Penn National had a $2.8 billion market cap. MGM had a market cap of $15.3 billion. On Monday, Penn National reached a $15.8 billion market cap and MGM traded with a $15.3 billion market cap.

Penn National ranks 612th on AssetDash, compared to 655th for MGM. Penn National has passed 59 companies this week and 82 companies in 2021 in market cap ranking.

Related Link: FanDuel Passed On Buying Barstool Sports Before Penn National, Portnoy Says

What Analysts Think: After the increase in Penn National’s valuation in 2020, the big question is can shares continue to go higher. Comments from analysts, Barstool Sports founder Dave Portnoy and upcoming state launches all could be positive catalysts going forward.

“We believe PENN has the opportunity to gain significant share in the online sports betting market at above peer margins driven by their Barstool partnership and physical footprint,” Rosenblatt analyst Bernie McTernan said in September.

The analyst said Barstool has a wide reach in the important demographic for sports betting and an engaged user base. McTernan had an $80 price target on Penn National and pointed to a bull price target of $300.

If Penn National can become No. 1 in the states it operates in and hold a 33% share, McTernan said Penn National could go to $300. The $80 price target was based on 15% market share as the No. 3 player behind DraftKings Inc. DKNG and FanDuel.

“Much of the investment case for PENN continues to center around Barstool and the sports betting/iGaming opportunity,” Bank of America analyst Shaun C. Kelley said in November. Kelley raised the price target for Penn National to $115 earlier this week.

The analyst highlighted the strong third-quarter earnings from the company and the chance for Barstool Sportsbook to be profitable in 2021, faster than competitors.

Portnoy’s Thoughts: In September, Morgan Stanley downgraded shares of Penn National to $55 based on valuation. The downgrade got a reaction and some comments from Barstool co-founder Dave Portnoy.

“We have an entire marketing force that we don’t have to pay,” Portnoy said. “We have a marketing force that you can’t buy."

Portnoy offered up commentary on how Barstool is a strong brand and its loyal following is a catalyst for growth ahead for the Barstool Sportsbook brand: “People root for Barstool like we’re a sports team. They root for us. They follow us.”

New States: In 2020, Barstool Sportsbook was only live in one state with its September launch. The brand ranked third in November with an 11.8% market share, behind FanDuel (36.6%) and DraftKings (22.9%).

The catalyst for Penn National in 2021 could be additional states launching the Barstool Sportsbook brand. Michigan and Virginia launches are expected soon.

Barstool Sportsbook is expected to launch in Colorado soon and could also come to Illinois, Indiana, New Jersey and West Virginia, according to PlayPennsylvania.

New proposals in states like Texas and New York could also see Barstool Sportsbook launches in the future.

PENN Price Action: Shares of Penn National were up 6% to $105.97 on Tuesday, hitting new all-time highs of $106.39 earlier in the trading session.