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Penn National Stock Up; JPMorgan Affirms Overweight on Valuation

'We maintain our overweight rating on PENN, and we highlight the stock as an interesting idea into year-end,' JPMorgan says.
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Penn National Gaming  (PENN) - Get Penn National Gaming, Inc. Report shares rose sharply Friday after J.P. Morgan reiterated its overweight rating on the gambling company, based largely on valuation.

“We highlight the stock as an interesting idea into year-end given high short interest/negative investor sentiment, an undemanding valuation, … and relatively solid land-based casino operations” among other factors, J.P. Morgan analysts wrote in a commentary. 

Penn’s trailing price-earnings multiple of 21.67 is below both its five-year average of 24.93 and the 23.34 reading for the Morningstar U.S. Market Total Return index, according to Morningstar.

The stock recently traded at $79.76, up 5%. It has slid 21% in the past six months on valuation concern. But it has nearly quadrupled (up 290%) in the past two years as investors are optimistic about the potential for sports gambling.

In August, Penn National agreed to buy Score Media & Gaming SCR, a Toronto sports-betting company, for $2 billion of cash and stock.

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Score Media’s platform and technology are “a powerful complement to the reach of Barstool Sports and its popular personalities and content," Penn National President and Chief Executive Jay Snowden said in a statement.

Under the terms, Penn National will pay $17 cash and 0.2398 share for each Score Media share.

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Also in August, Wyomissing, Pa.-based Penn National reported that it swung to a profit of $198.7 million, or $1.17 a share, in the second quarter, from a loss of $214.4 million, or $1.69, in the year-earlier quarter.

Revenue soared five-fold to $1.55 billion from $305.5 million a year earlier, when many of its casinos were closed due to Covid-19.