By Sam Boughedda
Jefferies analysts downgraded PENN Entertainment Inc (NASDAQ:PENN) to Hold from Buy, cutting the price target on the stock to 34 from $50 per share in a note to clients.
The analysts told investors the rating revision is mainly based on the shift in the firm's preference for Las Vegas operators and "clear growth stories" as it expects muted growth to modest decline across regional markets.
"While the company has announced multiple capital projects in Illinois, Ohio, and Nevada, constructions will not start until late 2023," wrote the analysts. "As a result, we are currently not modeling any earnings contributions from these projects through 2024 for now."
While Jefferies continues to see significant upside in the valuation for sports and digital wagering business, they also see the planned transition off of third-party player account management and trading platform simultaneously in the US as presenting "some execution risks, which will remain an overhang through most of the year."
"For estimates, we are lowering our 4Q22 estimates slightly as we expect modest impact from the snow storm in the Midwest towards the end of 2022. Meanwhile, we are lowering our FY23 estimates to $6.351B for revenue and $1.932B for Adj. EBITDAR from $6.380B and $1.947B prior to reflect our updated macro view with a recession starting 2Q/3Q23. Lastly, we are also lowering our FY24 estimates to $6.358B for revenue and $1.936B for Adj. EBITDAR from $6.385B and $1.950B," confirmed the analysts.