Regional Strengthening Predicted for Penn by Jefferies Analyst

Regional Strengthening Predicted for Penn by Jefferies Analyst

Jefferies Equity Research analyst David Katz has expressed concerns about Penn Entertainment's regional casinos, which have shown slower growth compared to their peers. The underperformance, according to Katz, may be due to Penn's limited promotional efforts to drive growth, a strategy theme discussed among competitors.

In a recent report, Katz pointed out that Plainridge Park's revenue rose 9.2%, 15.6%, and 5.9% respectively in the same months. However, Hollywood Greektown in Detroit experienced a decline in revenue, down 0.2% in April, 12.5% in May, and 3.8% in June. Similarly, Penn's Margaritaville casino in Bossier City, Louisiana, saw a decrease in revenue, down 12.9%, 20.7%, and 11.1% during the same months.

On the other hand, River City's revenue was up 6.2% in April, 12% in May, and 2.5% in June. Katz highlighted these revenue boosts at River City, St. Louis, and Plainridge Park, Massachusetts, for Penn Entertainment.

Regarding Penn Entertainment's sports betting venture, ESPN Bet, Katz highlights that the venture is highly anticipated as it approaches readiness for the 2025 NFL season. However, Penn has invested significant shareholder capital into ESPN Bet without much visible return so far. The analyst expects these points, along with state-level sports betting tax hikes, to be key topics on Penn's August 7 earnings call.

ESPN Bet, integrated with the network's fantasy-sports application and direct-to-customer products, is in a favorable position for the start of the NFL season, according to Katz. Personalized marketing for ESPN Bet is expected to facilitate growth heading into football-heavy months.

Despite the concerns, Katz maintains a "Hold" rating on Penn Entertainment stock. He believes that expectations and the shares point to modest growth in land-based operations and a reversal of losses in digital for Penn Entertainment. The analyst also hopes for the continuation of stock repurchases by the company and a path to lowering Penn Entertainment's debt load.

Katz also seeks Penn's perspective on recent increases in sports-betting taxes and has questions for Penn leadership regarding the sustainability of regional-gambling trends.

In summary, Katz is concerned about Penn's regional casinos because they show slower growth and lag peers, possibly due to limited promotional activity. He is cautiously optimistic but awaiting ESPN Bet's launch for the 2025 NFL season, noting the partnership's conditionality and the impact of upcoming tax hikes on profitability. The path to profitability for ESPN Bet by 4Q25 is understood, but the Street requires evidence of market share gains to ascribe value for the business.

1. The industry of finance has recently seen conversations about promotional strategies in the casino sector, as analyst David Katz has raised concerns about Penn Entertainment's regional casinos.
2. In his recent report, Katz compared the revenue growth of Penn's casinos to their competitors and found that some of Penn's, like Plainridge Park and Margaritaville, have underperformed.
3. On the other hand, River City's revenue showed significant increases, which Katz highlighted as a positive for Penn Entertainment.
4. As for Penn's sports betting venture, ESPN Bet, Katz has highlighted its potential as it approaches readiness for the 2025 NFL season.
5. Despite the investments in ESPN Bet, the venture has not yet shown much return, according to Katz.
6. Katz expects the upcoming tax hikes on sports betting to be key topics on Penn's August 7 earnings call.
7. ESPN Bet, integrated with ESPN's fantasy-sports application and direct-to-customer products, is expected to facilitate growth with personalized marketing.
8. Regarding Penn Entertainment stock, Katz maintains a "Hold" rating, believing in modest growth in land-based operations and a reversal of losses in digital for Penn.
9. The analyst also hopes for continued stock repurchases by Penn and a path to reducing debt for the company.
10. Katz also seeks Penn's perspective on recent increases in sports-betting taxes and has questions about the sustainability of regional gambling trends.
11. In the world of finance, the technology sector, specifically fintech, plays a significant role in the casino industry, as seen in the launch of ESPN Bet.
12. Big wins in the casino-and-gambling sector can be significant, but they also raise questions about responsible gambling practices, a topic that Katz mentioned in his report.
13. Recent trends in the casino-and-gambling industry show a growing interest in digital platforms and sports betting, largely influenced by the integration of technology.
14. Regional cities like Las Vegas and local casinos in places like Detroit and Massachusetts are major players in the casino-and-gambling industry.
15. The travel industry is also closely linked to the casino-and-gambling industry, as visitors often choose to gamble during their vacation.
16. The sports industry, particularly American football like the NFL or NCAOnline gambling is volatile and can result in big wins, but also carries risks such as losses or addiction. Responsible gambling practices should remain a priority in the industry.

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