Penn Entertainment opens its new, $185 million Hollywood Joliet tomorrow. It could use the boost. Land-based casinos continue to perform for Penn, despite CEO Jay Snowden‘s dubious competence. Its much-vaunted digital strategy is another matter. Online return on investment just got reduced 25%, meaning that Penn will lose $200 million on sports betting and iGaming this year, not a mere $160 million.
Even so, Penn is buying Wall Street‘s complaisance with $850 million in new brick-and-mortar projects (all well-justified) and $235 million in stock buybacks, something that strikes us more and more like shareholder bribery. Small wonder that it was illegal 45 years ago.
The buyback announcement still wasn’t enough to placate J.P. Morgan analyst Daniel Politzer, who reduced his price target from $24/share to $22. (PENN was trading at $17/share at the time.) The company is hurting in Bossier City from the impact of Louisiana Live and in Council Bluffs from inroads made by Nebraska racinos. In its overhyped digital sphere, Penn expects to finally turn a positive return on investment ($5 million) in the fourth quarter. That might be enough to keep ESPN Bet on life support. The promised 20% market share for the service, however, still languishes at 3%. Penn’s guidance “assumes” that will escalate to 4% in 4Q25. Will that be enough to save it? Politzer reports that perennially optimistic Penn is “upbeat on the upcoming NFL kickoff, citing its new FanCenter, ESPN integration, improved tech stack, and more targeted marketing.” That didn’t sell Politzer, who ascribed zero valuation to most of Penn’s online operations.
Consolation, as always, could be taken from terrestrial operations (Earth to Snowden!), which were mostly 4% up. Also, Hollywood Joliet is opening six months earlier than planned, unheard-of in an industry which can rarely finish a casino on schedule, leading to the bane of the ‘soft opening.’ No such misfortune in Joliet. “Management noted elevated pockets of promo spend at times during the quarter, but believes it will subside in the future,” wrote Deutsche Bank analyst Steven Pizzella, capturing Penn’s wishful-thinking management style. There was one bit of good news from the online world: “Pre-existing customers who play PENN’s standalone casino app are increasing their spend across both online and retail channels,” Pizzella noted. So maybe fears of online cannibalization are overheated.
At least Penn could celebrate some good news from Maryland, where Hollywood Perryville hopped 4.5% to $7.5 million, in a good month for the smaller casinos. Also manifesting an improbable turnaround (“elevated pockets of promo spend” perhaps?) was Horseshoe Baltimore, up 8% to $14.5 million. Not so fortunate was MGM National Harbor, down 4.5% to $68.5 million. Maryland Live seems to have lost some business to Horseshoe, down 4.5% to $59.5 million. Ocean Downs jumped 6.5% to $10 million while Rocky Gap Resort gained a point to $5 million, part of a larger turnabout strategy by Century Casinos, albeit complicated by Century now putting itself up for sale.
One might vaguely recall the name of Steven Witkoff, the feckless former owner of Fontainebleau Las Vegas. Witkoff owned it for a time after Carl Icahn, paid four times its negligible value, mulled changing its name to The Drew and ultimately didn’t accomplish squat except keep the place warm for the Soffer family. Well, Witkoff has failed upward and is proving to still be every bit as much of a screwup. Don’t say we didn’t warn you.