The earnings season for casino stocks is set to intensify next week, with Penn Entertainment (NASDAQ: PENN) slated to report on Thursday, August 6. Ahead of this announcement, a notable research firm has identified the stock as one of its prime picks within the industry.
In a recent client report, Citizens Equity Research analyst Jordan Bender analyzed regional casino stocks and expressed optimism about Penn Entertainment, already recognized as one of the top performers in the sector this year, suggesting that further gains are possible.
“We anticipate several positive catalysts in the upcoming quarters, including project returns, decreasing leverage, and a turning point in the digital business,” comments the analyst.
Bender reiterated a “market outperform” rating for Penn, increasing his price target to $26 from $24, which indicates a potential upside of 23.2% based on current trading levels.
Regional Casino Stocks Considered ‘Overly Punished’ Amid Economic Concerns
Penn’s shares have risen almost 43% year-to-date, though they’ve declined by roughly 5% over the past month. Bender attributes this dip to what he perceives as “over punishment” due to broader economic worries, particularly soaring gas prices.
The impact of high energy costs is significant for regional casino operators like Penn, who depend on customers commuting to gaming locations. Nevertheless, there is minimal evidence suggesting that macroeconomic pressures have harmed earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) or gross gaming revenue (GGR). In fact, Penn’s core clientele appears to be holding strong.
“Similar to the energy surge in early 1Q26, gaming demand has proven resilient despite elevated fuel prices; recent gaming revenue trends show minimal signs of consumer retreat (GGR +3% in the last three months), reinforcing our view that the regional customer base remains robust,” adds Bender.
The resilience of consumers could benefit Penn, as the company has just completed a $360 million investment in Illinois, a critical market, and is finalizing a $100 million hotel tower at the Hollywood Casino Columbus in Ohio. Initial data suggests the enhancements in Illinois are starting to show positive results in a highly competitive environment.
Keep an Eye on Churchill Downs
Churchill Downs (NASDAQ: CHDN) joins Penn and Red Rock Resorts (NASDAQ: RRR) as favored picks among regional casino stocks, though the investment thesis is slightly different than for Penn.
“Potential catalysts for Churchill Downs include the introduction of electronic table games, the expansion of Derby Week, and a possible sale of its regional gaming segment,” Bender noted.
Amid increasing consolidation trends among Las Vegas Strip operators, there is speculation that regional operators could also engage in similar activities, with rumors suggesting that Churchill Downs might consider selling its relatively stagnant regional casino division; however, the company has not confirmed any such plans.