Hotel Partnership Leaves Penn National Gaming Stock Static

The equity has tacked on over 478% in the last nine months, however

Digital Content Manager
Jan 14, 2021 at 11:01 AM
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The shares of Penn National Gaming, Inc (NASDAQ:PENN) are flat this morning, last seen up 0.02% at $103.60, amid news that the gambling concern will partner with Choice Hotels (CHH). The deal will expand benefits for loyalty members of both companies. In turn, KeyBanc initiated coverage on the security with a "sector weight" rating, noting that the market is ascribing excessive credit to its value. Meanwhile, Truist Securities and Craig-Hallum upped their price targets on the equity to $120, with the latter adding that December NJ gaming data capped off a breakout year for sports betting.

Penn National Gaming stock has experienced a significant amount of growth over the past year. Shares are just coming off a Jan. 13, all-time-high of $106.80, which stands in stark comparison to the security's March 18, 12-year low of $3.75. The 20-day moving average has also been a consistent source of support recently, and in the last nine months alone PENN has tacked on 678%.

Analysts were split towards the equity coming into today. Of the 13 in coverage, seven carried a "strong buy" rating, while the remaining six deemed it a tepid "hold" or worse. However, the stock's 12-month consensus target price of $80.87 is a 22.4% discount to current levels, meaning more price-target hikes may be on the horizon.

Digging deeper, shorts are already hitting the exits in droves. Short interest fell 10.3% in the last two reporting periods, and the 12.84 million shares sold short make up roughly 11% of the stock's available float, or nearly three days' worth of pent-up buying power.

The options pits lean overwhelmingly bullish, with calls popular. This is per PENN's 50-day call/put volume ratio of 2.93 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 93% of readings from the past year. This means calls are being picked up at a much quicker-than-usual clip. 

For those looking to weigh in on the stock's next move with options, now seems like a perfect opportunity. The equity's Schaeffer's Volatility Index (SVI) of 77% stands in the extremely low 9th percentile of its annual range, suggesting options players are pricing in low volatility expectations. Plus, PENN's Schaeffer's Volatility Scorecard  (SVS) sits at 99 out of 100, meaning the equity has tended to exceed option trader's volatility expectations over the past year -- a boon for option buyers.

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