Penn Entertainment Share Prices Plummet Amid Analysts’ Doubts Over Potential Buyout

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In a rather bleak development for investors banking on Penn Entertainment’s potential buyout, the shares of the regional casino operator plunged on Friday following a disheartening analysis by Truist’s Barry Jonas. The volume of shares traded in this precipitous decline was nearly 50% above the daily average, as Jonas painted a grim picture, noting that Penn Entertainment is unlikely to consider selling in the short run. This insight came as a crushing blow, particularly as Donerail Group, led by money manager, had previously nudged Penn Entertainment’s management to ponder selling on account of the casino operator’s possibility of doubling its market capitalization.

Despite Donerail Group’s persistent vigilance and its formal letter to Penn’s board of directors, advocating for the strategic review of the company’s stand in the market, Jonas asserted it’s unlikely that the board would initiate the move in the near term, duly dimming the sheen of a potentially imminent buyout.

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Rain, however, wasn’t the only thing Jonas brought to Penn Entertainment’s buyout parade. Even as he somewhat diluted the hope of an imminent buyout, the seasoned analyst ambitiously ratcheted up his price target for the firm’s shares to $25, up from $23, reflecting a robust 43.6% surge from the closing price on June 14.

The missive, which meticulously stirred up the long inactive stock, garnered tangible short covering but was largely met with a collective shrug-off by many analysts who postulated that an outright sale of Penn in the near term is a less probable occurrence. Jonas joined in this discord, arguing that the persistently high interest rates could constrain acquisition values.

He went on to illuminate how the high interest rates have pressured gaming companies to cut down and refinance their debts – actions that have garnered applause from various quarters, including analysts and investors. Yet, as directly proportional as they may be, these very interest rates seem to be bogging down Penn Entertainment’s share prices, with potential buyers, in need of financial backing, shying away from striking transactions due to the increasingly burdensome financing costs and ballooning interest expenses.

One of Penn’s pivotal objectives centers on its ESPN Bet, which was a significant cause of the bone of contention in Donerail’s critical review of Penn and its suggestion for a potential sale. While Penn Entertainment has admittedly stumbled in the realm of online sports betting, its commitment to ESPN Bet – a sports betting mobile application that was launched in November – is unwavering.

“Penn has a clear ESPN Bet product roadmap that could benefit lavishly during the upcoming football season. The app has struggled to cinch a significant market share, a challenge shared by nearly all competitors in the online sportsbook space, barring the eminent DraftKings and FanDuel.

Despite being caught in the headwinds of fierce competition, low returns, and potential tax hikes, Penn Entertainment is poised to capitalize on ESPN Bet’s brand visibility and technological advancements to magnetize more bettors during football season in 2024.