Domestic casino operator Penn National Gaming, Inc. (NASDAQ: PENN) shares have fallen by (-60%) off the 2021 highs into year’s end despite being one of the few profitable publicly traded casinos. The Company has virtually no exposure to Macau which is undergoing intense China scrutiny with potential game-changing regulations imposed in 2022. The spread of the omicron COVID-19 virus has once again impacted the travel and leisure industry, though not as bad as the pre-vaccine period. While shares fell with the overall casino industry, Penn Gaming has made good headway in 2021 as it gains market share in both domestic gaming and with its sportsbook Barstool Sports app, which has transformed into a lifestyle brand amongst Millennials and Generation Z. Prudent investors seeking exposure in a profitable and growing casino operator with no exposure to China can watch for opportunistic pullback levels in shares of Penn Gaming.
Q3 FY 2021 Earnings Release
On Nov. 3, 2021, Penn Gaming released its fiscal year Q3 2021 earnings for the quarter ending September 2021. The Company reported a profit of $0.52 per share versus consensus analyst estimates for a profit of $0.91 per share, missing by (-$0.39) per share. Revenues grew 33.8% year-over-year (YoY) to $1.51 billion matching consensus analyst estimates.
Penn Gaming CEO Jay Snowden commented, ““We achieved many significant milestones in the third quarter. We successfully launched the Barstool Sportsbook mobile app in five states (Colorado, New Jersey, Tennessee, Virginia, and Arizona), which more than doubled our footprint. In addition, we opened Hollywood Casino York to strong initial results, began to roll out our market-leading cashless, cardless, and contactless (“3Cs”) technology across the portfolio and continued to derive multiple tangible benefits from our highly differentiated omni-channel strategy. We also continued to generate revenues and EBITDAR significantly above 2019 levels, despite exogenous events that had a one-time impact on our quarter. While July was a record month, the second half of August and September was impacted by Hurricane Ida and regional flare-ups of the Delta variant, which reduced property Adjusted EBITDAR and Adjusted EBITDAR margins by an estimated $30 million and 85 basis points, respectively. As the operating environment has normalized, we have seen improved results in October. Further, Other Segment results included a $12.5 million lobbying expense to support the California sports betting initiative and $7.5 million in expenses related to new state launches of our Barstool Sportsbook app. In addition to the five new launches of our Barstool mobile sportsbook betting app, all of which occurred before the start of the football season, earlier this week, we launched our mobile sports betting app in Iowa, which expands our footprint to 10 states. Overall, we are benefiting from our increased scale and are driving higher handle and revenue market share across the board while remaining disciplined with our marketing and promotional spend. These results underscore our commitment to our business model, which remains focused on near term profitability rather than aggressive marketing aimed at generating short term increases in handle.” He continued, “As the most popular sports media app in Canada, theScore is uniquely positioned to capitalize on the legalization of single event sports wagering in Ontario when the province is ready for launch. Consistent with our previously disclosed strategy, we anticipate theScore Bet will be our leading brand in Canada while we will continue to lead with Barstool Sportsbook in the U.S. Most importantly, we expect that both brands will benefit from the marketing support of Barstool Sports and integration with theScore’s media app. We are excited to welcome theScore’s rapidly growing team into the Penn National Gaming family and are looking forward to leveraging Canada’s world class talent pool of engineering and technology expertise.”
Core Business Expansion
CEO Snowden added, ““As stated above, excluding the impact of Hurricane Ida and the Delta variant in the quarter, we saw a continuation of the trends from prior quarters including growth in our VIP segments and our younger demographics. Our VIP segment grew by 33% compared to Q3 2019, fueled by increases in both the number of guests playing at higher levels and the frequency of their visitation. Additionally, we are experiencing continued engagement with our younger customers, who are generating new growth, and more than offset any declines in Q3 of our older core gaming customers due to the Delta variant. Importantly, October reflects more of what we saw in the first half of the third quarter with strong property level performance across our segments somewhat offset by new competition in Colorado and Indiana as well as the residual impact of gaming expansion in Pennsylvania. Meanwhile, our retail Barstool Sportsbook concepts have stimulated database growth and increased frequency of visitation in the younger segments, while boosting gaming and food and beverage spend. Following the recent passage of legalized sports betting in Louisiana, we opened retail sportsbooks at L’Auberge Casino Baton Rouge and Boomtown New Orleans, and we are looking forward to expanding into our remaining Louisiana properties pending regulatory approval.
He continued, “New technology is also driving demand. Downloads of our mychoice app, which enhances the customer experience, increases engagement, and improves marketing capabilities, increased 22% in the quarter while utilization is also higher. Additionally, our 3Cs technology provides a digitally integrated experience by offering a touchless, engaging, efficient, and convenient experience for our guests. This new technology removes friction from transactions and reduces wait times and lines. It also positions our properties for the future by fulfilling the expectations of younger consumers who expect cashless options at hospitality and entertainment venues. The 3Cs are now live at three properties in Pennsylvania and four in Ohio, and we plan to roll out the 3Cs to additional properties throughout this year and into next, pending regulatory approvals. On August 12th, we celebrated the opening of Hollywood Casino York, which is our third casino in the Commonwealth of Pennsylvania. This casino is built for the future, with new technologies and customer conveniences, including the 3Cs and a Barstool Sportsbook. While still early, we have been encouraged by the combined performance of Hollywood York and Hollywood Casino at Penn National Race Course. We are confident in our ability to grow the overall market due to the positioning of our properties in the region, particularly with the anticipated opening of Hollywood Casino Morgantown later this year, pending regulatory approvals. We recently opened a career center and are accepting applications for approximately 375 new positions at Hollywood Casino Morgantown, which will feature approximately 750 slot machines and 30 table games, a Barstool Sportsbook and multiple food and beverage outlets.”
Barstool Sports App
CEO Snowden provided more color on its sportsbook and iGaming app, “We have also made significant improvements to our sports betting product, including the introduction of Parlay+ (same-game parlay) and shareable bet slips. Nearly 50% of our customers bet with Barstool exclusives and participate in merchandise promotions, odds boosts and opportunities to bet with or against popular Barstool talent. As a result, the Barstool Sportsbook is currently tied for the highest-rated sports betting app in North America in the Apple app store with a 4.8 user rating out of 5.0. We believe we will make even more meaningful improvements as we move to integrate our sportsbook with theScore’s best-in-class sports media app and betting technology which will provide us with a highly customizable and fully integrated technology solution. Meanwhile, we are continuing to bolster our iCasino offerings, including the recent launch of our Barstool-branded live dealer studio in New Jersey. We now operate iCasino across three states (Pennsylvania, Michigan, and New Jersey) and are positioned to gain additional market share with the launch last week of our first in-house developed, Barstool-branded digital iCasino game in New Jersey, ’Barstool Blackjack.’ Meanwhile, Barstool Sports has continued its rapid ascent into one of the premier entertainment and lifestyle brands for Millennials and Generation Z. With a highly diversified revenue mix of advertising, brand licenses and commerce, Barstool is on track to once again meaningfully grow revenues year over year. Equally important, Barstool continues to aggressively pursue opportunities to unlock new channels for future growth. For example, Barstool recently announced its intent to support collegiate athletes in pursuing NIL (name, image, and likeness) sponsorship arrangements. In just a few months, Barstool has signed 135,000 collegiate athletes to serve as Barstool Athletes, demonstrating the incredible power of the brand across the younger demographic. In addition, One Bite frozen pizza was recently introduced exclusively at Walmart stores across the country, with initial sales exceeding expectations. Finally, we anticipate launching the first two stand-alone Barstool-branded sports bars in the coming months in Philadelphia and Chicago, which will represent an extension of our omni-channel strategy to more targeted, flexible, and highly valued locations.”
PENN Price Trajectories
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for PENN stock. The weekly rifle chart formed a market structure low (MSL) buy trigger above $52.20. The weekly rifle chart downtrend is slowing as the 5-period moving average (MA) flattens at $69.48 followed by the falling 15-period MA near the $62.12 Fibonacci (fib) level . The weekly stochastic finally bottomed and crossed back up as it attempts to bounce to the 20-band. The daily rifle chart has been in an uptrend with a rising 5-period MA at $50.47 and flat 15-period MA at $48.98 attempting a pup breakout. The daily stochastic is attempting to form a mini pup to the 80-band, which can spike the shares to the daily upper Bollinger Bands (BBs) at $55.07. Prudent investors can watch for opportunistic pullback levels at the $47.63 fib, $46.03 fib, $43.13 fib, $39.18 fib, $34.78 fib, $31.24 fib, and the $28.14 fib level. Upside trajectories range from the $69.21 fib up towards the $99.24 fib level.
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