Will This Downgrade Hurt Pinnacle Entertainment (PNK) Today? (Update)

Update (9:35 a.m.): Updated with Friday market open information.

NEW YORK (TheStreet) -- Deutsche Bank downgraded Pinnacle Entertainment  (PNK) to "hold" from "buy" and set a $28 target price. The firm noted consensus estimates are likely too high.

The stock was falling 3.61% to $24.59 at 9:33 a.m. on Friday.

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Separately, TheStreet Ratings team rates PINNACLE ENTERTAINMENT INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate PINNACLE ENTERTAINMENT INC (PNK) 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. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PNK's very impressive revenue growth greatly exceeded the industry average of 5.4%. Since the same quarter one year prior, revenues leaped by 77.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 119.71% and other important driving factors, this stock has surged by 70.63% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • PINNACLE ENTERTAINMENT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PINNACLE ENTERTAINMENT INC reported poor results of -$2.29 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus -$2.29).
  • The debt-to-equity ratio is very high at 19.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, PINNACLE ENTERTAINMENT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: PNK Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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