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HomeMarketPENN and Caesars Stocks Get Downgrades as Spending on Gaming Flattens

PENN and Caesars Stocks Get Downgrades as Spending on Gaming Flattens

Bank of America says slowing consumer spending growth will hurt casinos.

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BRIDGET BENNETT/AFP via Getty Images

Analysts at Bank of America downgraded a pair of casino stocks, citing a slowdown in consumer spending, among other reasons.

Analyst Shaun Kelley downgraded
Caesars Entertainment
(ticker: CZR) and
PENN Entertainment
(PENN) to Neutral from Buy on Wednesday, citing concerns about consumer spending and whether people will spend as much on gaming during a recession. Kelley lowered Caesars’ price target to $55 from $60 and PENN’s to $40 from $45.

Caesars shares declined 4.8% to $50.04 Wednesday. PENN shares dropped 4.2% to $33.57.

The analysts said they see risks for the gaming sector from inflation and the possibility of heightening unemployment during a recession. The analysts called casino gaming stocks “the largest ‘over-earners’ vs. pre-COVID” in their coverage.

“We are taking a more defensive stance until the macro-outlook or valuations become more compelling,” the analysts added.

PENN declined to comment. Caesar couldn’t immediately be reached for comment.

Shares of Caesars have sunk more than 45% so far this year. In November, the casino operator beat on third-quarter earnings, thanks in part to a better digital segment performance. Caesars posted a $38 million loss for third-quarter digital same-store adjusted Ebitda, while analysts had anticipated $93.6 million.

PENN shares have declined nearly 35% this year. In 2020, the company purchased a 36% share of Barstool Sports. In August, Penn purchased the remainder of the company

BofA analysts said the company “hit a home run with its initial Barstool stake” but “Barstool’s momentum has returned to earth.” 

“PENN is still working to grow its in-house digital capabilities and (re)-establish itself in the top tier of the landscape,” analysts added. 

Write to Emily Dattilo at emily.dattilo@dowjones.com

Credit: marketwatch.com

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