By Mackenzie Tatananni
Penn Entertainment stock rallied Friday after the sports-betting company received an upgrade from JPMorgan, with analysts citing a "favorable risk-reward" even as shares of competitors DraftKings and Flutter were slipping.
Shares of Penn Entertainment rose 3.6% to $20.74 after JPMorgan upgraded the stock to Overweight from Neutral and boosted the year-end 2025 price target to $27 from $19.
The firm identified Penn's "path to aggregate growth," including $850 million worth of investments into four retail growth projects in 2024 and 2025 that are expected to produce double-digit returns.
The company currently operates 43 casinos and racetracks across the U.S., as well as a nationwide casino loyalty program, though much of the hype derives from its online sports betting and gambling operations.
Penn operates through five segments: four designated by region, and an Interactive segment that encompasses the company's digital operations. This includes the ESPN Bet-branded digital sportsbooks and betting services.
JPMorgan wrote that "some degree of ESPN Bet success is the single biggest driver for the stock." In a scenario where Penn's Interactive arm was less than successful, analysts added, "we see the value of the land-based casinos and market access fees equating to $26 per share, in any event."
The firm noted that Penn's share price has underperformed its peers and the S&P 500 by an average of 45% for each of the last four years, comparing Boyd Gaming, Churchill Downs, and DraftKings, among other examples.
Penn appears increasingly poised for a takeover. On May 31, shareholder The Donerail Group wrote that a sale "could generate meaningful and certain value creation for equity investors."
Rumors surfaced in June that Boyd Gaming was interested in making an offer to acquire the company. Neither party responded to requests for comment at the time.
As Penn's stock rose Friday, competitors saw none of the same gains. DraftKings was down 2.7%, while Flutter, the owner of FanDuel, was down 1.3%, MGM Resorts International was off 0.4%, Boyd Gaming dipped 0.3%, and Churchill Downs was flat.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
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(END) Dow Jones Newswires
December 13, 2024 11:32 ET (16:32 GMT)
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