The gaming stocks have gotten clubbed, but PENN Entertainment is a diamond in the rough. Its third-quarter earnings report could show investors just how strong the regional casino business is.
PENN has been through the wringer. The company's stock soared to absurd heights in 2020, the year PENN bought a stake in Barstool Sports from controversial sports media entrepreneur Dave Portnoy. It completed the $550 million purchase in 2023, before selling it back to Portnoy later that year for $1. Then it paid Walt Disney's ESPN $150 million per year to rebrand as ESPN BET, but the customers still didn't show up, and in 2025, the deal was terminated early.
After this embarrassing string of mistakes, it's no surprise that PENN attracted activist investors. HG Vora Capital Management has used pressure and proxy votes to add five members to the company's now 11-person board, presumably with the goal of persuading CEO Jay Snowden to sit on his wallet.
That makes sense, because the underlying business is quite strong. PENN is the largest regional casino company in North America, with casinos in such un-Vegas-y locales as Charles Town, W.Va., and Bangor, Maine. That's actually the place to be, since the Macau casino business has been sinking due to China's economic struggles, while the Las Vegas Strip is having problems as well. Consumers squeezed by inflation feel less inclined to spring for trips to Sin City, and Canadians in particular are staying away.
But the gambling bug is hard to shake, and Truist analyst Barry Jonas reports that "fundamentals in the regional market remain solid, with continued consumer trade-down benefits offsetting elevated inflation and higher energy prices."
Importantly, PENN has been making good investments, and its newly land-based casino in Aurora, Ill., (it used to be a riverboat!) seems to be doing well. Wells Fargo analyst Trey Bowers rates PENN Equal Weight, but he wrote in an Oct. 19 note that the stock (along with Boyd Gaming) is a "tactical long," since "regional trends are strong, [free cash flows] are inflecting, and recent Capex projects successful."
The stock is up just 3% year to date, but that actually makes it a star compared with MGM and Wynn, which are down 22% and 39%, respectively. Given its exposure to the stronger parts of the casino business and the improvements it's making to its strategy, PENN's outperformance is likely to continue.
Investors who have the heart to buy the company ahead of its Thursday earnings release next week could see that bet pay off in spades.
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