If you looked at PENN Entertainment’s stock chart a few weeks ago, you might have winced. The casino and sports betting giant had been taking a beating for months. But things changed fast last week. The stock price shot up 20%, leaving investors wondering if they missed the boat or if the real rally is just starting.
It’s a classic Wall Street mystery. When a stock that’s been down in the dumps suddenly finds its footing, there’s usually a reason. And in this case, the reason is a mix of pressure from the outside and whispers of a potential sale.
The activist in the room
The spark for this recent jump didn’t come from a big win in Vegas. It came from a letter. Donerail Group, an activist investor, stepped into the light to tell PENN’s board exactly what they thought of the current share price. Their message? The company is worth way more than the market is giving it credit for.
Donerail suggested that PENN could be worth double its current price if it were sold to the right buyer. They pointed out a glaring gap between what the company’s physical casinos are worth and where the stock is trading. When a big investor starts making noise about a sale, people tend to buy first and ask questions later.
The ESPN Bet headache
But there’s a reason the stock was so low in the first place. PENN has been trying to crack the code on online sports betting for years. First, they bought Barstool Sports, then they pivoted to a massive partnership with Disney’s ESPN. It hasn’t been cheap.
So far, ESPN Bet has struggled to grab a significant slice of the market from giants like FanDuel and DraftKings. The company has spent billions trying to make it work, and investors have been losing patience. But the recent price jump suggests that some people think the worst of the spending is over.
Is the price still right?
Even after a 20% gain, PENN isn’t exactly expensive by historical standards. Some analysts argue that if you ignore the digital betting drama, you’re looking at a collection of successful regional casinos that are still making plenty of money. The argument for buying now is simple: you’re getting the casinos at a fair price and getting the potential of the sports betting app for free.
- Regional casinos remain the company’s biggest cash cows
- Activists are pushing for a sale or a major strategy shift
- The stock is still trading well below its 52-week highs
The house usually wins, but for PENN investors, the real question is whether they’re still the house—or just another player at a very expensive table. Whether this surge is a turning point or just a temporary bounce depends on if the board listens to the calls for a sale.