Lady Luck appears to be back in the building, as entertainment powerhouses like Penn National Gaming (NASDAQ:PENN) are recouping their losses. And that’s been great news for PENN stock.
In fact, since late May 2020:
- MGM Resorts (NYSE:MGM) rallied from $15.27 to $18.20
- Boyd Gaming (NYSE:BYD) soared from a low of $18.81 to $22.25
- Las Vegas Sands (NYSE:LVS) ran from $42.43 to $46.89
- Caesars Entertainment (NASDAQ:CZR) popped from $10.90 to $12.06
With all of those big names in mind, let’s take a look at PENN stock.
The last time I mentioned Penn National Gaming was on May 22, as the stock traded at $28.11. It’s now up to $31.40, and pushing higher. And, as I noted, “If the U.S. economy can successfully reopen, PENN stock could revisit highs of nearly $40.”
Well, trends are moving towards that sentiment — and that could mean a massive gain in PENN stock.
PENN Stock Is Back in the Black
Risks are now breaking down for casino stocks, such as Penn National Gaming.
Even better, gamblers are just beginning to return to Las Vegas and other hot spots around the U.S., with many casino operators opening with safety plans. Some of those include temperature testing for employees, sanitization, fewer slot machines and fewer seats at table games.
Overall, though, the best part is that many casinos saw a mad rush of gamblers after reopening. So if the U.S. economy can avoid a second shutdown — even with new coronavirus cases — stocks like Penn National Gaming can continue to push higher.
Also, not only does Penn National have casinos in Las Vegas, but it has a good deal of them in the Southeast as well. In fact, the company just reopened 10 casinos in Louisiana and Mississippi. In turn, here is what Jay Snowden — President and CEO of the company — said about the return:
“Penn National is very well-positioned to resume its positive momentum that was cut short in mid-March by the COVID-19 pandemic. Our geographic diversification across 19 states – with no more than 15% of our revenues being derived from any single state – should be a significant benefit as states begin to open casinos on a sequential basis.”
Therefore, this is a major catalyst for PENN stock.
The Online Gambling Boom Is a Boon for Penn National
Collectively, online gambling is only heating up.
In fact, according to Morgan Stanley gaming analyst Thomas Allen, “We believe the impact of COVID-19 could spur more states to legalize online casino and sports betting.” In New Jersey, for example, online gambling revenues could be well above $700 million this year from $483 million in 2019.
Moreover, Penn National Gaming will also benefit once sports teams can come off the sidelines again.
This mainly thanks to its Barstool Sports partnership, where it owns a 36% stake. As many of you know, Barstool is an incredibly popular sports blog that will have its sports betting app up shortly.
“Penn will have its Barstool (sports betting) app running by the third quarter,” said Macquarie’s Chad Beynon, “and we believe the app (and the Barstool) database can be worth $10-to-$25 per share of equity over time.”
Essentially, Barstool will put Penn National Gaming in the ring with other online sports betting companies, like DraftKings (NASDAQ:DKNG) and MGM Resorts.
The Bottom Line on PENN Stock
Penn National Gaming has only begun to recover lost ground, and recoup its losses after months of lockdown.
However, Lady Luck back appears to be back. And with plenty of patience, I still believe that PENN stock could race to $40 per share. Not only is it seeing bigger traffic as pandemic stay-at-home orders are lifted, but it’s also gaining momentum on the heels of an online gambling boom.
That being the case, PENN could benefit very well, as the American Gaming Association notes sports betting could produce up to $41.2 billion a year.
So while the PENN stock won’t recover all of its lost ground overnight, it’s a safe long-term bet. And that’s especially true if the U.S. and global economies can stay open.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, he did not hold a position in any of the aforementioned securities.