BY MARK SEBASTIAN
September 21, 2023
Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Trader,
Draft Kings is currently the king of online betting.
Yet the stock has an EPS of -2.58 a share.
The biggest online sports betting company…is LOSING over 2.5 a share.
Yet the company is worth almost 14 billion dollars.
The company has a ton of competitors too…ones that have brick-and-mortar casinos that bring in real dollars.
MGM made 1.03 a share and is worth less than Draft Kings.
This brings me to this week’s stock Penn Gaming.
This was a stock I made markets on when I was a floor trader so it has a place close to my heart.
The company has been in the news recently.
They dumped barstool sports for 1.00 back to David Portnoy and engaged in a deal with ESPN on the same day.
The ESPN deal in particular is huge in my opinion because when I go to ESPN.com I’ll be able to bet directly on Penn Gaming’s platform.
Yet the company is only worth 3.47 billion dollars…
So with that in mind, is this a company that is worth the long-term buy? Let’s break it down…
The Good…
The numbers say buy Penn.
It has 8.46 of cash per share… which is huge….this is because of the massive positive cash flow and EPS out of the company.
Penn produced a cash flow of 7.37 per share in the last 12 months and earnings of 4.34.
The book value of the company is 28 dollars a share.
The revenue per share of 38.64…
This company makes MONEY.
And they have not even started the ESPN deal.
Penn has an EPS of 5.47…silly-cheap knowing they have the potential growth of an ESPN
By all accounts, this stock should be trading at all-time highs…
Yet it had a chart that looked like this:
So what is going on?
This leads us to the bad…
The Bad
The management…
You sold Bar Stool Sports for over 500 million dollars…you sold it back to the founder for 1.00.
I get writing off a bad idea…but typically that type of error has consequences..this did not.
This is a management problem.
Then there is the debt-to-equity ratio…
Debt is not outrageous, but relative to the value of the company it is high.
The Verdict…
You have to weigh the numbers vs. the management.
Is the tailwind strong enough to carry the company in the face of what appears to be less than great management?
My answer is yes…
I think there is a huge upside here…
And for the first time ever the 4 traders that write this post will do a live discussion on how to trade this on MONDAY.
We will send you the video if you can be there.
Your only option,
Mark Sebastian
Questions about that? Leave a comment below!
Mark Sebastian
Founder & CEO, Option Pit
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