Analyst Calls Bottom for Penn National Gaming Stock

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Penn National Gaming was upgraded to “overweight” at Morgan Stanley

Morgan Stanley this morning upgraded casino and sports betting stock Penn National Gaming, Inc (NASDAQ:PENN) to “overweight” from “equal weight,” with a price target of $51. The brokerage said that despite recent weakness in the shares, PENN presents a solid buying opportunity, citing potential for growth in its theScore and Barstool Sports brands. 

PENN is bucking the broad-market selloff as a result, last seen up 2.2% at $37.35. Like Morgan Stanley mentioned, there has been considerable weakness in the shares, which hit a near two-year low of $35.70 last Friday. Multiple trendlines have emerged as pressure for the stock’s decline, most recently the 20-day moving average, putting the security at an almost 60% year-to-date deficit. It’s worth noting, however, that the stock could be overdue for a short-term bounce, as its 14-day Relative Strength Index (RSI) of 32 indicates it’s just on the cusp of being “oversold.”

Should this be a pivot point for PENN, there’s plenty of room for analyst upgrades. Coming into today, seven of the 15 in coverage called the stock a “hold,” compared to eight “buy” or better ratings. Meanwhile, short interest has been on the rise, up 5.8% in the last two reporting periods, and the 11.22 million shares sold short make up a solid 6.8% of the stock’s available float, leaving room for a short squeeze to push the equity higher. 

Options bulls are already targeting PENN at an elevated clip, with 4,113 calls across the tape so far — three times the intraday amount. The most popular by far is the weekly 4/29 40-strike call, with positions being sold to open here. In distant second is the 4/29 38-strike call.