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- Shares of Penn National Gaming are set to continue benefiting from the "Portnoy momentum trade" as sports-betting euphoria extends into the fall football season, Stifel said on Wednesday.
- "The recent launch of the Barstool Sportsbook app coupled with other sports betting 'announcements' should allow the shares to continue riding the sports betting euphoria wave higher," Stifel said.
- Penn National has rallied 165% year-to-date, vastly outperforming the S&P 500's year-to-date return of 5% through Wednesday.
- Stifel expects shares of Penn National to hit $85, representing potential upside of 25% from Wednesday's close.
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The "Portnoy momentum trade" that has helped shares of Penn National Gaming surge more than 165% year-to-date is set to continue as "sports-betting euphoria" continues into fall, Stifel said in a note on Wednesday.
Penn National acquired a stake in and partnered with Barstool Sports in January. The regional casino operative has utilized the Barstool Sports brand in its launch of an online sports betting app, which is set to compete with the likes of DraftKings and Fanduel.
"The recent launch of the Barstool Sportsbook app coupled with other sports betting "announcements" should allow the shares to continue riding the sports betting euphoria wave higher," Stifel said.
Stifel said that it sees "considerable momentum" building in all of Penn National's business segments and admitted that its previous estimates on the long term potential of company "were way too conservative and needed to be revised higher," according to the note.
The new estimates from Stifel is what drove its decision to raise its price target on Penn National from $47 to $85, representing potential upside of 25% from Wednesday's close.
Besides raising its estimates, Stifel speculated that the momentum trade behind Penn National can continue on given that the long-term potential of online sports betting is real.
"Here's the thing: nobody is going to be proven right or wrong about the size/profitability of those segments [sports betting] for years to come, given those markets remain in their infancy and won't mature for 10+ years," Stifel explained, adding that any positive news flow around sports betting should continue to push shares higher.
The upside is, many states have yet to legalize sports betting, and the COVID-19 pandemic could be the catalyst that gets states to move forward with legalization, Stifel opined.
"Given the ongoing pandemic and the fact many states are hurting for tax dollars, we believe there could be up to 10 states that could fast track or formally pass sports betting/iGaming legislation come this November," said Stifel.
Sports betting stocks like Penn National should continue to work if a November election headline reads that more states legalized sports betting, according to the note.
Shares of Penn National jumped as much as 10% to $74.73 on Thursday.
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