Penn Gaming (NASDAQ: PENN) Stock a Value Under These Levels

Casino operator Penn National Gaming, Inc. NASDAQ: PENN shares were crushed from a high of $39.18 on Feb. 18, 2020, right before the benchmark S&P 500 index NYSEARCA: SPY started it’s (-34%) collapse the very next day. Fast forward one-month later as Penn shares hit a low of $3.75 per share on Mar. 18, 2020, before starting its recovery with the SPY. The stay-at-home mandates all but froze Penn’s revenues as a domestic casino operator with 41 properties located in the Northeast, Southwest, and Midwest. The lifting of the restrictions along with its entry into the online sports betting trend have accelerated shares back near pre-COVID levels. Risk-tolerant investors may want to consider taking positions on opportunistic pullbacks as the restart narrative and digital sports betting trends play out.

Q1 FY 2020 Earnings Release

On May 7, 2020, Penn Gaming released its fiscal year Q1 2020 earnings for the quarter ending March 2020. The Company reported a loss of (-$5.26) per share versus consensus analyst estimates for a loss of (-$0.10) per share, missing by (-$5.16) per share. While the loss may seem shocking, it was mostly non-cash goodwill write-downs. The Company pulled 2020 guidance as most of its properties were shutdown due to isolation mandates. The Company priced stock and note offering consisting of 16.67 million shares at $18 and $300 million of 2.75% convertible senior notes due 2026.

Company Updates

Penn Gaming CEO Jay Snowden was interviewed on CNBC on May 22, 2020. He commented on strong reopening of Louisiana and Mississippi casinos, which represent 25% of revenues. He noted that all slot machines and table games will be spread apart and limited to three to four players. Snowden was very optimistic about online sports betting. On July 10, 2020, Penn Gaming announced it had resumed operations at 90% of its 41 gaming and racing properties including Plainridge Park Casino in Massachusetts and Hollywood Casino Bangor in Maine. The Company plans to have all properties operating in several weeks.

The Digital Sports Betting Wave

Penn Gaming has seen shares accelerate largely due to its stake in Barstool Sportsbook app and the army of day traders piling into its stock. Penn announced in-game wagering options using the official National Football League (NFL) play-by-play data feed in partnership with Sportradar. The big hype lies in the Q3 2020 expected launch of its Barstool app. The Company will be offering its 20 million casino customers along with Barstool’s audience of 66 million fans. Through its Penn Interactive Ventures, LLC, they iCasino in Pennsylvania and operate online sports betting in Indiana, Pennsylvania and West Virginia and seeks to continue expanding as states pass online betting legislation. The Company along with its sports betting app peers Draftkings (NASDAQ: DKNG) and MGM Resorts International NYSE: MGM  suffered a damaging blow when California recently blocked passing online sports betting legislation. As remaining sports leagues both amateur and professional decide and resume game schedules (with or without fans), the passage of digital sports betting legislation will be the driver for Penn Gaming moving forward. It’s important not to chase entries but to wait to get bargain price at opportunistic price levels.

 PENN Price Trajectories

Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for PENN stock. The weekly formed a market structure low (MSL) buy above $15.97 Fibonacci (fib) level. In a rare occasion, both the weekly and daily rifle charts share the same market structure high (MSH) trigger under $27.46. The weekly is a make or break, which could result in a bullish pup breakout above $34.72 towards $39.83, $43.92 and $45.22 upside targets on a stochastic rise. On the flipside, the weekly stochastic cross down on a bearish stochastic mini inverse pup stochastic slip can present opportunistic pullback entry levels at the $29.61 Fibonacci (fib) level , $27.46 weekly/daily MSH trigger and fib level, $24.22 fib level and the $21.34 super fib level. The migration to digital sports betting will spike shares on news of sports leagues starting, more states passing gambling legislation and product launch in Q3 2020. Negative catalysts for stock selloffs include mandated rollbacks of re-openings in COVID-19 hotspots, failed sports gambling legislation and any delays of the launch of its Barstool Sportsbook app. Earnings are expected after the better on July 28, 2020, with Company updates on the catalysts.