Penn National Gaming (PENN) stock sank Thursday after missing earnings views. Meanwhile, MGM Resorts (MGM) stock reversed lower from record highs, despite better-than-expected earnings late Wednesday.
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Caesars Entertainment (CZR) also retreated below its 50-day line after managing to hold that key level Wednesday following its mixed results. CZR stock was down more than 6%.
Online sports betting giant DraftKings (DKNG) reports early Friday.
Visitors have returned to casinos in recent months after pandemic-related travel and capacity restrictions were largely lifted. While mask mandates still exist at Nevada casinos and the delta variant has made some folks cautious, casinos are operating at full capacity and conventions are returning.
Meanwhile, sports betting’s busiest time of the year is underway, with the NFL season in full swing.
However, many gambling stocks have slumped in recent months as casino operators struggle to return to profitability as they manage higher operating costs related to Covid-19 safety protocols.
Penn National Gaming Earnings
Estimates: Penn National earnings per share were seen dropping 20% to 64 cents, but sales were set to gain 34% to $1.51 billion.
Results: Penn earnings per share declined 44% vs. a year earlier. Revenue came in at $1.51 billion.
CEO Jay Snowden said Penn launched the Barstool Sportsbook mobile app in Colorado, New Jersey, Tennessee, Virginia, Arizona and Iowa, which more than doubled its footprint to 10 states.
In a note to clients Nov. 4, CFRA Research analyst Arun Sundaram said heavy promotions in September to support these launches negatively impacted profits.
„While PENN expects a narrower loss in its digital business in Q4, the company doesn’t expect profitability until 2023 (similar to Caesars) due to ongoing customer acquisition costs and product/technology investments,“ he wrote.
Additionally, Snowden said that while July was a record month, the second half of August and September was impacted by Hurricane Ida and regional flare-ups of the delta variant, which reduced property margins by an estimated $30 million and 85 basis points.
„As the operating environment has normalized, we have seen improved results in October,“ he said in a statement.
Penn also spent $12.5 million lobbying to support the California sports betting initiative and $7.5 million to launch Barstool in new states.
Penn Stock
Shares plunged 20% to 57.85 on the stock market today to its lowest level in nearly a year. PENN stock is trading well below its 50-day and 200-day lines, according to MarketSmith.
Shares are well off their all-time high of 142 achieved in mid-March. Penn stock’s relative strength line also took a dive Thursday. Its RS Rating is just 25, while its EPS Rating is 50.
CFRA Research analyst
MGM Resorts Earnings
Estimates: Wall Street expected MGM to trim losses by 96% from the year-ago period to 4 cents a share. Sales were seen popping 117% to $2.44 billion.
Results: Adjusted EPS of 3 cents on sales of $2.7 billion, both beating views.
Net revenue at Las Vegas Strip casinos and resorts soared 187% year over year to $1.4 billion.
Net revenue at regional casinos jumped 66% vs. the prior-year quarter to $925 million
CFRA Research analyst Tuna Amobi said in a research note Nov. 4 that „MGM’s Q3 results showed some progress on the road to recovery from the pandemic-related disruption of its casino businesses.“
MGM China net revenue popped 517% compared to the year-ago quarter to $289 million.
Amobi says that while MGM China (Macao) seemingly faces a very long road to recovery amid tightened travel restrictions due to the delta variant and a regulatory overhang, U.S. operations have already surpassed their pre-pandemic levels.
BetMGM
BetMGM posted a loss of $49,060. MGM doesn’t expect BetMGM to be profitable until 2023. Its focus right now is on growing its reach. BetMGM is live in 16 states, with plans to expand to 20 states by the first quarter of 2022.
MGM is also shedding property ownership to improve its balance sheet.
On Sept. 26, MGM Resorts entered into an agreement to acquire the operations of The Cosmopolitan for $1.625 billion. Additionally, at closing, MGM will enter into a lease agreement for the real estate assets of The Cosmopolitan.
In August, MGM Resorts sold MGM Growth Properties to VICI in a deal worth more than $17 billion. As part of the deal, MGM Resorts will receive about $4.4 billion.
„The completion of our asset light strategy will allow us to simplify our corporate structure and bolster our liquidity,“ CEO Bill Hornbuckle said in a statement.
Analyst Amobi, who hiked his price target for MGM stock to $56 from $42, said he sees „further upside to recent strategic actions toward portfolio realignment pursuant to an asset-light model.“
CEO Hornbuckle also announced MGM Resorts is seeking to sell The Mirage casino in Las Vegas. No buyer or price was revealed.
MGM Stock
Shares fell 2.6% to 47.43 after reaching 50.39 intraday. Shares is extended from a 43.87 cup-with-handle buy point. MGM stock could offer an add-on buy point from another short shelf.
Its relative strength line is taking a breather after notching multimonth highs a couple of weeks ago. Its RS Rating is 93, while its EPS Rating is a mere 29.
Caesars Earnings
Estimates: FactSet analysts expected EPS of 16 cents, up from a $6.09 loss a year ago. Revenue was expected to swell 93% to $2.66 billion.
In a note to clients Oct. 30, CFRA Research analyst Sundaram is looking for stronger margins post-pandemic „as the company reduced labor hours, cut certain low-margin food, beverage and entertainment options, and divested certain unproductive assets.“
Growth from group and convention bookings should help grow occupancy rates and margins, he added.
Online sports betting is also expected to bring in significant revenue. In April 2021, Caesars completed its acquisition of William Hill, a leading online sports betting company, for about $4 billion.
Results: Caesars posted a loss of $1.08 per share on sales of $2.69 billion.
Caesars Stock
CZR stock slumped 6.5% to 103.51 on Thursday, breaking below its 50-day line. Shares dipped 1.2% to 109.37 on Wednesday, after initially tumbling Tuesday night.
Caesars stock’s relative strength line is trending down, after peaking in early October. Its RS Rating is 92 out of 99, but its EPS Rating is just 55, as casino operators figure out a way back to profitability amid higher costs related to post-pandemic reopening.
DraftKings Earnings
Estimates: It’s expected to post an 87-cents-a-share loss for the quarter, a 53% decline year-over-year. Yet sales are seen surging 78% to $236.9 million.
In September, DraftKings made two takeover bids for MGM Resorts partner Entain, a major global sports betting and online gaming outfit.
Entain rebuffed both attempts, the second of which topped $22 billion.
The deal would have made DraftKings the world’s largest online betting operator. But it faced likely intractable governance issues with MGM Resorts, Amobi said in a note to clients Oct. 30.
Results: Due early Friday.
Stock: DraftKings stock was down 5.5% on Thursday. DKNG stock is trading below its 50-day and 200-day lines. Its relative strength line is also slumping, as shares are well below their 52-week high of 74.38 in late March.
Find Adelia Cellini Linecker on Twitter @IBD_Adelia.
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