Exclusive: Penn National Gaming stock expected to fall on Wednesday

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Exclusive: Penn National Gaming stock expected to fall on Wednesday

The options market is betting that Penn National Gaming Inc. s earnings report moves the beleaguered gambling company's stock Wednesday one way or the other.

Options bets for the $10.4 billion company show expectations for a move to 7% after anticipated pre-market release, continuing the volatile earnings day trading the casino operator has seen since it took a stake in Barstool Sports in January 2020. A downside move of this magnitude - should the update disappoint - would push the stock to its lowest since November and bring its loss to 55% since March. Penn National fell 0.7% to $66.24 on Wednesday.

The betting company's stock has fizzled over the recent months amid a shortage of sporting events and as the company struggled to gain market share for its mobile gambling offerings in closely watched states like Pennsylvania and Michigan.

Even though the stock's highly multiple shows investors still believe the company will be successful in mobile betting, which is something that hasn't been seen so far, said Penn Capital Markets analyst Daniel Adam. He is one of just two with a sell rating on Loop Capital Markets The stock is currently trading at 120 times earnings, more than four times the multiplication of S&P 500 Index according to Bloomberg data compiled.

The rhetoric was that Adam could leverage the powerful Barstool Sports brand and not have to spend as much as other players to gain traction, Penn said. A view of the top three shares was unsuccessful - but the reality has been that they have not been able to maintain a share position which is a goal

Other Wall Street analysts continue to bullish on the Wyomissing, Pennsylvania-based company. The difference between the average 12 month price target of $105 and the closing price of Wednesday is near the biggest for the company in its more than two-decade existence.

The earnings report of Thursday gave a deeper look at the firm's Barstool Sportsbook, showing how well it was doing in expanding into the newly-companied sports-betting market. The stock soared more than 400% to a record in March from the news of its stake in January 2020, as analysts cheered the mobile gambling offering.

That enthusiasm has since dried up, with the stock sliding on underwhelming monthly gambling data from the states where Barstool Sportsbook is offered. The four states are where Barstool Sportsbook is legal and available.

While Penn published preliminary second-quarter revenue that topped the average analyst estimate in June, the stock fell as earnings before interest, taxes, deductions and amortization missed expectations. Some analysts warned that the strong regional revenue was anticipated, fueled by pent-up demand from gamblers flocking to Penn's quarterly casinos after the lockdowns ended.

That said, the biggest bull, Needham analyst Bernie McTernan, argued in a June 24 note that the company can be more aggressive in drawing customers for the upcoming NFL season to bolster its share of the mobile sports betting market.

Any commentary from Wall Street to the quarterly results or on the earnings call related to Plans for the upcoming professional and college football seasons will be closely monitored by management.