Penn National will nosedive 57% as weak fundamentals overshadow ‘internet meme’ rally, Deutsche Bank says
- An influx of retail-investor interest in Penn National Gaming boosted shares too far, too fast, Deutsche Bank said Thursday.
- The bank’s analysts lifted their price target for Penn National Gaming shares on Thursday to $31 from $22, implying a 57% plunge over the next 12 months.
- While Penn National’s improvements to operating costs show promise, the stock has transformed “into an internet meme of sorts” without the fundamentals to support its rally, the analysts said.
- Few states are interested in passing online gambling legislation, and the company’s total addressable market is smaller than bullish investors realize, they added.
- Watch Penn National trade live here.
Penn National Gaming shares are up more than 800% from their mid-March trough, but Deutsche Bank doesn’t think the rally will hold.
Analysts Carlo Santarelli and Steven Pizzella raised their price target to $31 from $22 on Thursday, implying shares will tumble 57% over the next 12 months from Wednesday’s close. The bank reiterated its “sell” rating for Penn National and cited improved operating costs for the target bump.
The casino and sports-betting company’s surge was fueled by retail investors who turned the stock “into an internet meme of sorts,” the team wrote in a note to clients. Penn National’s partnership with Barstool Sports garnered interest from casual investors earlier in the year, but the recent influx of inexperienced day-traders drove extraordinary momentum.
Barstool founder and day-trading streamer Dave Portnoy frequently backed the stock to his millions of online followers, further fueling the summer frenzy.
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Institutional investors quickly followed the retail crowd
Already Weak, Air Travel Demand Is Fading. And Pent-Up Business Travel Demand Will Be Soft Whenever It Arrives
The global decline in air travel will be worse than previously forecast and a new report on corporations’ plans travel through 2021 shows that the recovery of business travel demand will continue be sluggish even after the anticipated approval of one or more Covid-19 vaccines in, hopefully, the first half of 2021.
The International Air Transport Association, the airline industry’s global trade group, said Tuesday that global passenger traffic this year will be down a whopping two-thirds – or 66% – from 2019. Previously IATA had forecast a traffic decline of 63%.
While the revised view is only 3 percentage points worse than IATA’s previous forecast, the enormous numbers of passenger miles flown globally in a year means that measly 3-point difference amounts to a staggering 220.5 million fewer passenger miles being flown this year than previously expected by IATA. Globally in 2019 the world’s airlines flew about 5.2 trillion passenger miles. One passenger flying one mile equals a passenger mile flown. IATA now expects the world’s airlines to fly only about 1.65 trillion passenger miles, total, in 2020.
“The improvement that we saw in the summer months has more or less stopped,” said IATA Chief Economist Brian Pearce.
Globally, airline traffic in August – typically the peak month for air travel – was down 75.3% from the same month in 2019, when adjusted for both the number of passengers flown and the distances they flew. In July, he said the year-over-year drop was even worse: down 79.5%. He did not provide traffic decline figures for September,