Even when Penn National shares are down, the company is coming out ahead. One of the hottest stocks in the market since the March crash, casino owner and betting house Penn National (PENN) dropped as much as 9% in early trading today on news of a follow-on offering of 14 million shares. Still, the stock recovered most of its losses by the early afternoon once investors absorbed information in the latest prospectus that showed an improved outlook from management.
“In the prospectus they put out, their Q3 outlook is better than where the Street was modelling,” said Ryan Sigdahl, Senior Research Analyst at Craig-Hallum Capital Group, in a phone interview. “This gives them the increased flexibility to both update their casinos – digitize them – as well as accelerate their omni-channel investments [including] Barstool-branded retail sports books.”
Penn said in the offering document that it expects its third quarter, which ends next week, to produce revenue of $1.04 billion to $1.145 billion. Consensus estimates were $1.03 billion for the quarter, according to data from Koyfin.com.
The company also offered more good news about Barstool. Penn’s new Barstool Sportsbook mobile app was the most-downloaded sports-related app in the U.S. last weekend, despite it being released in a limited test in Pennsylvania. There were about 180,000 downloads of the app nationally, with 12,000 first-time depositors in Pennsylvania who funded their accounts with an average of $243, Penn stated in the prospectus. Total wagered on the test weekend, Sept. 15-17, was $11 million. Penn bought a 36% stake in Barstool this January.
Since bottoming out at $4.52 in March during the pandemic sell-off amid worries over casino closures, Penn shares have gained 1,427% as of yesterday’s close of $69.
“It’s two-fold: one is better performance in reopening the casinos, and two is enthusiasm around Barstool,” analyst Sigdahl said.
By virtue of its holdings in Barstool and its position in sports betting overall, Penn National is one of the 40 stocks in the JohnWallStreet Sports Index. Since the index was formed at the start of August, Penn has gained 91%, second only to U.K.-based sports bookmaker William Hill. The Sportico index as a whole has been outpacing the broad market.
Barstool appears to have brought in sports-enthusiast traders to Penn. One measure of small investor enthusiasm – the number of Robinhood users owning the stock – shows that retail traders in Penn stock rose 82% from the time Penn invested in Barstool until mid-August, when Robinhood stopped disclosing user ownership statistics.
The gains come even as today’s follow-on offering dilutes shares. Since May, the company has boosted its available inventory by 37%, issuing 43.49 million shares (including notes the company sold that can convert into shares). The dilution has raised capital for company operations, offsetting a portion of the negative effects of issuing more shares.