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Stifel believes that Penn Entertainment’s brick and mortar business could give it the competitive tailwind it needs to trade higher from here. The bank upgraded the sports betting stock to buy from hold. It also lifted its target price to $21 from $19, implying a rally of 43% ahead. Shares of Penn Entertainment have fallen 26% this year. The stock plunged 10% on Thursday after it terminated its sport betting agreement with Disney’s ESPN earlier than planned. PENN YTD mountain PENN YTD chart “When we first announced our partnership with ESPN, both sides made it clear that we expected to compete for a podium position in the space,” Penn CEO Jay Snowden in a news release. “Although we made significant progress in improving our product offering and building a cohesive ecosystem with ESPN, we have mutually and amicably agreed to wind down our collaboration,” he continued. However, Stifel analyst Jeffrey Stantial believes that this termination actually provides a tailwind for Penn stock to move higher. “We believe valuation discounts forthcoming ramp in FCF, driven by inflecting Retail cash flows & pivot to a more capital efficient iCasino-led Interactive strategy,” he wrote. “While recent underperformance partially factors concerns on the consumer & rising competitor promo spend, we see PENN as comparatively well-positioned given geographic diversification, well-documented operating prowess, and relatively higher quality assets enabling PENN to compete primarily on product.” Penn on Thursday reported mixed third-quarter results. The company’s $1.72 billion revenue came in line with expectations, while its bottom-line loss was wider than anticipated. But Stantial noted that Penn’s profitability target for the fiscal 2026 year remains intact. He also cited Penn’s attractive pipeline of growth projects, such as its Joliet casino, as key upcoming catalysts for the stock. “Uncertainty on iCasino execution & margin ramp may remain an overhang for several quarters, though we take comfort in recent market share momentum, PENN’s already top-tier iCasino product, & omnichannel UA advantages with re-allocated development & marketing resources potentially accelerating momentum even further,” the analyst added. “Bottom-line, as visibility into forthcoming FCF inflection improves, we see the current discount vs. peer multiples compressing and hence rate PENN Buy.”
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