It May be Time to Buy Beaten Down Casino Stocks

FILE PHOTO: The spinning wheel on a Roulette table is seen at the Dragonara Casino in St Julian's

Pay close attention to casino stocks, like Penn National Gaming (PENN).

According to the American Gaming Association, commercial gaming is off to its fastest start ever, booking Q1 revenues of $14.31 billion.  That’s a new record for the first quarter, and just about matches the all-time quarterly high of $14.35 billion in Q4 2021.

“Consumers continue to seek out gaming’s entertainment options in record numbers,” said AGA President and CEO Bill Miller. “Q1’s strong results build on the industry’s record year in 2021 despite continued headwinds from supply chain constraints, labor shortages, and the impact of soaring inflation.”  Also, “Gaming executives are signaling confidence in our continued recovery that is in line with record-setting consumer demand for gaming. I’m optimistic that 2022 will see the return of a true sense of normalcy for gaming.”

That’s great news for casino stocks like Penn National Gaming, which was just upgraded to a buy with a $49 price target out of Jefferies.  The firm notes, “that recent stock weakness has reduced shares to a level that, “comfortably reflects the stable cash generation of the land-based casino business,” and cited value from the company’s digital and media assets as well as its performance during uncertain times, as reasons for the upgrade,” according to Barron’s.

At the moment, PENN is oversold after dropping from about $38 to about $28.