Why Goldman Sachs Is Bullish On Penn National Gaming's Coronavirus Recovery

Penn National Gaming, Inc PENN shares were rallying strongly Thursday following positive sell-side comments.

The Penn National Analyst: Goldman Sachs analyst Stephen Grambling initiated coverage of Penn National with a Buy rating and 12-month price target of $60, suggesting 20% upside from current levels.

The Penn National Thesis: Penn National is positioned to benefit from a "rapidly rebounding" regional casino space and inflecting growth in sports betting, Grambling said in the initiation note. (See his track record here.)

The company is likely to report near-term segment EBITDA above consensus expectations, the analyst said, citing Goldman's proprietary work.

The embedded customer base and content creation engine of Barstool Sports, in which Penn has a 36% stake, will likely result in one of the lowest customer acquisition costs in the sports betting industry, he said.

This will help Penn National quickly take market share, Grambling said. 

Relative to publicly traded peers, Penn has significantly higher gaming exposure outside of the destination gaming markets in Nevada and New Jersey, which are less dependent on fly-to traffic, the analyst said.

Penn has the potential for a rapid recovery, as is evident from its reopened properties, Grambling said, citing Goldman's proprietary analysis of Penn's properties relative to peers across mobility and exposure to COVID-19 cases.

"As the company delivers on existing and mobile growth opportunities, we see upside to consensus estimates driving a multiple re-rating."

PENN Price Action: Penn National shares were jumping 8.27% to $53.88 at last check Thursday.

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