As long as the novel coronavirus remains a risk, casinos will struggle. It might seem odd that Penn National Gaming (NASDAQ:PENN) has been on a tear since the pandemic struck.
But a closer look shows that Penn is playing the long game and makes for a good buy-and-hold pick.
It’s worth noting that PENN stock could see some volatility in the coming weeks as second-quarter earnings materialize. A big part of whether or not the stock is up for another plunge depends on if the firm can deliver with its Q2 results.
Long-term investors who are willing to wait out some volatility could start building a position in PENN stock now and use any upcoming dips to add to it.
Unique Positioning of PENN Stock
One of the things that sets Penn National apart from other casino operators is its locations. Unlike some of the bigger names, Penn operates mostly outside of Las Vegas. Only a handful of the casinos under Penn’s umbrella are in Vegas, the rest of the casinos and racetracks it manages are dotted across the country.
That’s an advantage in the wake of the Covid-19 pandemic, especially in the U.S. While some states have very low case numbers, others have started to skyrocket. That has put a damper on summer traveling plans and means many people will be hesitant to get on an airplane or stay in hotels.
Penn’s range of casinos and racetracks in cities around the country means they’re more accessible to those who aren’t willing to stray far from their hometown.
Sports Betting Comeback
PENN stock is also poised to benefit from the rising popularity of sports betting in the U.S., something that will surely be addressed during the firm’s Aug. 6 earnings release. Over half of the states that Penn National operates in have already legalized sports betting, and many others are likely to follow as states look for new ways to increase revenue to pay for coronavirus-related expenses.
On top of that, many states are also mulling over whether or not to relax online gambling laws, which would give Penn’s online gaming segment a shot in the arm. The firm has been investing in its online gambling future, most recently with the acquisition of Barstool Sports.
Barstool has gotten a lot of attention recently as its founder Dave Portnoy has been using the absence of sports betting during lockdown to play the stock market. His success on the market has garnered millions of followers on social media, which will help pull people toward sports betting with Penn National once the sports schedule resumes.
Near-Term Risks
Like just about every other company on the planet, the biggest risk to PENN stock in the near-term is another wide-scale lockdown due to the coronavirus. The firm’s finances depend not only on people coming into its gambling locations but also on the resumption of the normal sports schedule. As it stands, it looks like professional sports will come back, but university sporting events are still a question mark.
Plus, PENN stock isn’t the only choice when it comes to online gambling and sports betting. While the the company’s acquisition of Barstool puts it in a strong position, it doesn’t guarantee the firm will rise to the top of the pack.
The Bottom Line on PENN Stock
The risks facing Penn National are worth considering in the near-term, but the firm’s long-term outlook looks strong. Penn National is a bet on America’s return to normal that will pay off for years to come as the online gambling space continues to expand in the U.S.
It’s worth picking up PENN stock now and using any near-term turbulence to continue building a position.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.
