What to Make of PENN's Impressive Chart Performance

Penn National Gaming stock is up over 200% year-to-date

Dec 15, 2020 at 10:39 AM
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Penn National Gaming, Inc. (NASDAQ:PENN) is an American company that operates 41 different gaming and racing properties in 19 states throughout the country. Penn National Gaming provides live sports betting services, as well slot machine entertainment. Quite a few Penn National Gaming facilities operate under the Hollywood Casino brand.

On Monday, Dec. 14, Penn National Gaming stock closed the trading session with a solid 6% increase. At one point during market hours yesterday, Penn National Gaming stock pushed up to a record high of $84.49. Though there was no singular reason for PENN stock price to jump 6% yesterday, there have been speculations about the move. The increased investor optimism surrounding the vaccine distribution this week may have just aligned perfectly with rising investor optimism around the legalization of sports betting in the United States.


Physical casinos took a major hit earlier in 2020 with the government shutdowns resulting from the Covid-19 pandemic, and a lot of investors bailed on casino stocks like PENN. However, the news of an effective vaccine should, eventually, breathe new life into physical gambling business locations. When that happens, Penn National Gaming could begin profiting from both the benefit of their online gambling platforms in addition to its legacy revenue returning from gamblers coming back to physical casinos. Using this logic, investors must be wary of the timeline for when casinos will reasonably "return to normal."

Now that we have reviewed the outstanding gain in PENN stock price this year, let's dive into how Penn National Gaming stock has fared when stepping up to the earnings stage in 2020. It was not a pretty start. The company's reported earnings per share (EPS) dropped dramatically to -$5.26 to kick off 2020 in the first quarter, missing Wall Street's expectations by a massive margin of $5.17. However, following the first quarter, both the second and third-quarter reports beat expectations. Penn National Gaming beat earnings expectations by $0.42 in the second quarter and by $0.40 (or 75% in the third quarter.

Penn National Gaming has grown its revenue substantially in recent years. but has continued to struggle to replicate that growth rate on its bottom line. The company’s net income has been consistently inconsistent, ultimately resulting a net income loss, on average. Penn National Gaming also carries a pretty big debt load of $11.27 billion and just $1.87 billion in cash and cash equivalents.

Regardless, now may be an attractive time to take advantage of the security's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 72% sits in the 8th percentile of its annual range, meaning PENN is now pricing affordably priced premiums.



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