NEW YORK (TheStreet) -- Shares of Penn National Gaming Inc. (PENN) may move higher today following an upgrade by FBR Capital from "market perform" to "outperform" with a price target of $15.00 (from $13.00).
"We continue to shift away from the Macau-centric stocks toward the much-maligned U.S. regionals with the upgrade of Penn National Gaming to Outperform. Although we are cutting near-term estimates with ongoing weakness in key markets, we are raising 2015-2016 estimates to above-Street levels and lifting our price target from $13 to $15 as we layer in Penn's healthy project pipeline," said FBR Capital analyst Jake Fuller.
"While we concede that it may be early, we see a bull case taking shape: cost controls leave Penn poised for an eventual regional recovery; a healthy project pipeline should drive 10% EBITDA growth through 2017 before assuming any recovery, and we do not see that reflected in consensus; and at the current price, we argue that investors are effectively getting existing operations at a fair price and paying little to nothing for the pipeline," Fuller added.
Shares of Penn National closed at $11.74 yesterday. In pre-market trade this morning, the shares are up 0.41, or 3.49%, to $12.15.
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TheStreet Ratings team rates PENN NATIONAL GAMING INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PENN NATIONAL GAMING INC (PENN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 42.49% is the gross profit margin for PENN NATIONAL GAMING INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -137.85% is in-line with the industry average.
- PENN, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues fell by 13.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- PENN NATIONAL GAMING INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PENN NATIONAL GAMING INC swung to a loss, reporting -$10.53 versus $2.00 in the prior year. This year, the market expects an improvement in earnings ($0.24 versus -$10.53).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 77.45%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 6100.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 4491.3% when compared to the same quarter one year ago, falling from $20.24 million to -$888.75 million.
- You can view the full analysis from the report here: PENN Ratings Report