Prior to the renaissance of online-sports gambling, Penn National Gaming (NASDAQ:PENN) was primarily known as an owner and operator of regional casino properties. That was a highly profitable venture until the novel coronavirus kept gamblers away from crowded casinos, which in turn put pressure on the price of PENN stock.
While the traditional casino business was hit hard by lockdowns and social distancing, e-commerce thrived during the first half of the year. The gaming industry had to adapt to this new environment or risk being put out of business.
Penn National Gaming is adapting and making the best of a challenging situation. Sure, PENN stock can be viewed as a “reopening trade,” as America’s restrictions on in-person gambling are gradually being lifted. An equally strong argument, however, can be made that Penn National is a compelling wager on online sports gambling with strong breakout potential.
A Closer Look at PENN Stock
It’s difficult to predict exactly when the stock’s breakthrough moment will occur. Yet, based on its historical price action, we can at least discern the price point that needs to be breached.
The bulls have made several runs for the $38 level this year. However, each and every time, the bulls were rejected, and the share price fell quickly. It’s frustrating, no doubt, but that’s the name of the game. as sometimes it takes many attempts before a resistance level is finally breached.
What the bulls need now is an increase in the daily trading volume of PENN stock as well as upward momentum in the share price. But once that $38 price point is broken with conviction, it’s off to the races, and $45 should be the bulls’ next target.
Reopenings Will Drive Growth
While the headline story should be the online-sports angle, I would be remiss to ignore the possibility of PENN stock benefiting from the reopening of the economy. After all, the fact that America’s casinos are being allowed to open again should be eventful for Penn National Gaming and its stakeholders. Penn National Gaming’s recovery in this domain will take place on a state-by-state basis.
To provide a couple of examples, we can observe that not long ago, the company announced two significant reopenings. One was the Plainridge Park Casino, located in Massachusetts. The other was Maine’s Hollywood Casino Bangor.
After these two reopenings, 37 of Penn National’s 41 gaming and racing properties are now up and running. So the company is not quite back to its pre-pandemic levels yet. Nevertheless, the owners of PENN stock should be encouraged by the progress that’s being made.
Gambling Hasn’t Gone Away
Although the novel coronavirus kept people out of casinos, not everyone has stopped gambling. They’re just doing it differently now. During the shutdowns, some bored people were introduced to online gaming, and now that market is thriving.
Penn National Gaming still has its 41 gaming and racing properties and 19 states, but the company isn’t wholly relying on in-person gambling. The acquisition of a 36% stake in sports-gambling website Barstool Sports proves that Penn National Gaming is ready and willing to adapt to shifts in gambling trends.
When warrants are factored into the equation, Penn National Gaming’s stake in Barstool Sports could conceivably increase to 50%. It’s a savvy move, as Barstool Sports has 66 million monthly active users, along with almost 100 million followers on social media.
Through this partnership, Penn National Gaming plans to introduce Barstool Sportsbook, a sports-gambling app, this fall. There will also be Barstool Bets, a service designed to provide gambling advice and news.
This collaboration will undoubtedly expand Penn National Gaming’s customer base. Just as importantly, it will keep the company in-line with recent gaming trends. If online betting is the future of gambling, then Penn National Gaming is getting ahead of the curve.
The Bottom Line
Penn National Gaming’s investment in Barstool Sports is the smartest move that the company could make right now. Thus, PENN stock’s breakout is probably coming soon as the shift to online sports betting has plenty of momentum.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.