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Penn National Gaming: 100%+ Upside Over 3-5 Years Driven By Barstool Sports Acquisition

Jun. 03, 2020 5:53 PM ETPENN Entertainment, Inc. (PENN)DKNG, PDYPY, TSG58 Comments
Catalyst Capital profile picture
Catalyst Capital


  • Enterprise Value to EBITDA projections point to significant upside potential.
  • Barstool Sports acquisition marries extensive retail casino footprint with large digital audience.
  • Customer acquisition costs will likely be the lowest in the industry.
  • We include our valuation analysis which points to 500% to 600% returns over next 3 to 5 years.

We believe Penn National Gaming (NASDAQ:PENN), at $31, is dramatically undervalued relative to the upside potential from legalized sports gambling in the United States. Thanks to its recent acquisition of Barstool Sports, we believe PENN will be a dominant player in the online sports gambling and iCasino market. We are holders of the stock since $13 and have recently added to our position around $30. Over the course of the next 3 to 5 years, we believe PENN will generate significant positive EBITDA and the market will re-rate its stock dramatically higher.

Largest Land Based Casino Operator in the USA

Penn National Gaming is an omni-channel casino that owns, manages, and has ownership interests in 41 properties in 19 states in the USA. It owns the largest number of gambling licenses in the United States. Prior to COVID-19, the company was also developing two Category 4 satellite gaming casinos in Pennsylvania: Hollywood Casino York and Hollywood Casino Morgantown. Plans for development of those casinos have been put on hold for the time being.

Barstool Sports Acquisition

In February 2020, PENN closed its investment in Barstool Sports, a leading digital sports, entertainment and media platform, an agreement in which they purchased approximately 36% of the common stock of Barstool Sports for approximately $163 million. Additionally, 3 years after the closing of the transaction, PENN will increase its ownership in Barstool Sports to approximately 50% with an incremental investment of approximately $62 million. Lastly, PENN has rights to acquire the remainder of Barstool Sports shares three years after closing its deal at a capped value of roughly $650M for the entire company (i.e., roughly $325M for the remaining 50%).

The beauty of this deal is PENN became Barstool Sports' exclusive gaming partner for up to 40 years and has the sole right to

This article was written by

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We seek outperformance by focusing on companies with significant near term drivers of value, or catalysts. None of our articles should be construed as investment advice. We may sell our positions at any point in time. Do your own research.

Analyst’s Disclosure: I am/we are long PENN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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