Penn Entertainment stock gets Goldman Sachs buy initiation as regional gaming outlook improves

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Penn Entertainment gets Goldman buy

Highlights

Goldman Sachs initiated Penn Entertainment with a buy rating, citing robust regional operations, improving interactive business, and recurring free cash flow projected to exceed $4 per share by 2028.
Penn shares have climbed 43% year to date as rising capital inflows into regional gaming and increased M&A activity support sector valuations and earnings potential.
U.S. commercial gaming revenue surged 7.2% in Q3 last year, outpacing 3.9% GDP growth, reinforcing optimism for Penn and the broader sector.

Goldman Sachs starts coverage with upside case

According to CNBC, Goldman Sachs says Penn Entertainment offers one of the more attractive risk-reward profiles in gaming as its regional operations reach an inflection point and its interactive business improves. Analyst Lizzie Dove said in a Friday note to clients that new projects and an attractive free cash flow yield support the bank's positive view.

Goldman Sachs said the company is on track to generate recurring free cash flow of more than $4 per share by 2028. Penn operates dozens of casinos and racetracks, and the bank said those assets leave it well placed to capitalize on improving conditions across regional gaming.

Sector resurgence supports broader sentiment

Shares of Penn are up 43% year to date as more capital moves into regional gaming names. Dove said the sector is in the midst of a resurgence, with merger and acquisition activity helping support valuations and earnings revisions offering room to move higher.

Industry data cited in the note also points to stronger operating momentum. Commercial gaming revenue in the U.S. grew 7.2% in the third quarter of last year, ahead of 3.9% gross domestic product growth in the same period, according to Morningstar.

Goldman Sachs' view is broadly in line with Wall Street expectations. LSEG data shows 12 of the 21 analysts covering Penn rate the stock a buy or strong buy.

Our earlier analysis of Caesars Entertainment (CZR) highlighted the company’s push into digital gaming via a tribal partnership that gives it early access to Maine’s online casino market, supporting longer-term revenue potential. We also noted that CZR’s price action was holding above key moving averages with a bullish bias, though momentum indicators suggested near-term conditions were somewhat stretched and warranted caution.

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