Omnichannel Integration And iGaming Legalization Will Create Value

Key Takeaways

• Growing digital platform and physical property upgrades are increasing customer engagement, recurring revenue potential, and margin expansion through enhanced cross-sell and technology integration.
  
• Regulatory tailwinds and prudent capital management position the company for stronger earnings, improved cash flow, and reduced risk in an evolving gaming market.
  
• Stiff digital competition, regulatory pressures, heavy investment needs, and shifting consumer habits threaten PENN’s profitability, growth, and ability to achieve digital scale.

Catalysts

Provides integrated entertainment, sports content, and casino gaming experiences.

• PENN’s expanding omnichannel platform—leveraging cross-sell opportunities between physical casinos and digital assets, including the Hollywood and ESPN BET brands—is growing its customer database (now 32M+) and driving higher spend per visit in both segments, positioning the company for recurring revenue growth and improved net margins as digital penetration increases.
  
• Regulatory progress—such as growing momentum for iGaming and sports betting legalization in new U.S. states and Canadian provinces (e.g., potential launches in Missouri, Alberta, and possibly Ohio)—offers substantial upside to PENN’s digital addressable market, with management forecasting positive Interactive EBITDA by 2026, directly feeding future revenue and consolidated earnings.
  
• Strategic capital investments in new resort-style and upgraded land-based properties (e.g., upcoming openings in Joliet, Aurora, Columbus, Las Vegas, and Council Bluffs) are expected to boost portfolio quality and non-gaming revenues, supporting both top-line and free cash flow growth while targeting higher operating efficiencies and tax-adjusted retail gaming margins.
  
• Integration of emerging technologies—personalization, improved user experience, data-driven marketing, and streamlined account linking (notably via Mint Club, favorites, cross-app functionality, and fantasy integrations)—should enhance customer loyalty and increase digital engagement, promoting higher customer lifetime value and margin expansion.
  
• Deleveraging and disciplined capital allocation—evidenced by continued debt reduction, robust liquidity, cost efficiency initiatives, and a stated increase in share repurchases as operational and free cash flow improves—support shareholders through potential EPS growth and mitigate downside risk as PENN transitions toward more profitable, tech-driven business lines.

PENN Entertainment Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming PENN Entertainment's revenue will grow by 5.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.3% today to 6.3% in 3 years time.
• Analysts expect earnings to reach $496.3 million (and earnings per share of $3.52) by about May 2028, up from $-85.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $395.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.9x on those 2028 earnings, up from -26.4x today. This future PE is lower than the current PE for the US Hospitality industry at 22.0x.
• Analysts expect the number of shares outstanding to decline by 2.74% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

PENN Entertainment Future Earnings Per Share Growth

Risks

• PENN's Interactive segment continues to report significant EBITDA losses, and although management is guiding towards profitability by Q4 2025 and 2026, any persistent underperformance or inability to achieve scale in its online sports betting (ESPN BET) and iCasino platforms could drag on consolidated revenue and earnings, especially given competitive pressures from established digital-first rivals.
  
• The digital sports betting market is experiencing a slowdown in growth due to a lack of major new state launches in 2025 and increasing market saturation, which could constrain PENN's future revenue growth and hinder the realization of anticipated digital market expansion benefits.
  
• Ongoing and potential new legislative and regulatory developments—such as skill-based gaming proliferation in key states (e.g., Pennsylvania) and rising compliance costs—may intensify competition or limit operational flexibility, increasing costs and impacting net margins.
  
• High capital expenditure commitments related to large-scale property upgrades, new development projects, and ongoing technology investments could burden PENN’s cash flows and limit its ability to further deleverage, placing pressure on future earnings and free cash flow if projected returns are not realized.
  
• Demographic and macroeconomic risks, including uncertainty in consumer discretionary spending and possible declining engagement from younger generations with traditional casino entertainment, present longer-term risks to visitation and spend, potentially impacting revenue and net margins over time.

Valuation

• The analysts have a consensus price target of $21.344 for PENN Entertainment based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $16.5.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.8 billion, earnings will come to $496.3 million, and it would be trading on a PE ratio of 7.9x, assuming you use a discount rate of 11.4%.
  
• Given the current share price of $15.45, the analyst price target of $21.34 is 27.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.