Analyst Claims Penn Entertainment Is Undervalued

However, Penn Entertainment has been rallying over the past 90 days, inching up 20.7% and Barry Jonas, a Truist Securities analyst, believes that there is more than meets the eye in the company. Penn is also a potential acquisition target for Flutter Entertainment, although the company seems reluctant to sell.

Penn’s Unrecognized Value May Play in Its Favor

Following a recent meeting with Penn’s top brass, Jonas has outlined an investor note in which he has said that Penn Entertainment remains in his opinion a “buy” option. He has put the value of the stock at $25 in terms of price target, even though the stock is right now trading at $19.24 and is far from its $117.37 pick in May 2021.

Confidence is not further boosted by the slow showing of the ESPN Bet which has struggled, but Jonas has said that these trends are mostly distracting from the company’s core strength, which lies in the land-based sector.

He may have a point as sports gambling has turned a drag on proceeds, forcing many established brands to shutter their operations, among which are evoke, and now potentially Betfred, which is also mulling a potential exit from the United States. However, Penn has kept its ground and has said that it would not enact a strategic review – the process which usually results in sale or exit from markets.

In other words, Jonas is betting on Penn’s land-based venues to outperform pessimistic expectations at a time when revenue from the sports betting sector is increasingly subject to cut-throat competition. The land-based sector, in contrast, remains a vibrant market and is unlikely to slow.

All of this has prompted Jonas to conclude that Penn is indeed what he describes as an “unrecognized value.” Jonas has a point here. ESPN Bet is more of a trophy acquisition and a bit of an embarrassment when you think that the company sold the Barstool brand back to its owner for $1 when it had spent millions to acquire it in the first place.

ESPN Bet Hogs the Limelight – Undeservedly

However, most investors have taken issue with ESPN Bet’s rather slow growth. Although much hope was pinned on ESPN’s name, the realities on the ground are such that breaking into a market dominated by the likes of DraftKings, FanDuel, and BetMGM is no mean feat already, but elbowing these established companies is a Herculean task all by itself.

Investors have been focusing a little too much on the ESPN’s faltering start, Jonas believes, but he is also positive that the brand will continue to gain exposure and popularity owing to its unique synergies with the namesake sports network which is synonymous with sports in the United States.

A far more exciting opportunity for Penn’s online operations could be the iGaming vertical, which is now another focus area for the company. Penn’s interactive division has also been affected by contractions in business, with the company announcing layoffs in July.