Boyd Gaming Vs. Penn National: Which Stock Is The Better Casino Rebound Trade?

Monday 11th May 2020

Casino stocks have had a rough year in 2020 due to coronavirus (COVID-19) shutdowns. However, some long-term gambling bulls believe business will get back to normal for gamblers as soon as casinos reopen.

Two of the most popular regional U.S. casino operators are Boyd Gaming Corporation (NYSE: BYD) and Penn National Gaming, Inc (NASDAQ: PENN), and both stocks have taken a beating this year. Boyd shares are down 39.6% year to date, while Penn shares are down 26.5%.

There is a bull case to be made for both stocks at this point. Here's how they stack up against one another.

Related Link: The Road To Recovery For Las Vegas Casino Stocks

The Boyd Bull Case

Boyd operates about 30 gaming facilities in 10 different U.S. states, including 12 properties in and around the Las Vegas area. Las Vegas casinos remain closed at this point, but Bank of America analyst Shaun Kelley recently said some properties could start opening back up in late May, while others could reopen in early June.

In the meantime, Kelley said Boyd's stellar balance sheet will help it get through the shutdown. As of March 31, Boyd had $4.44 billion in total debt and $831.2 million in cash on hand.

"BYD's strong balance sheet should see it through and it has ample flexibility/levers to navigate this crisis, we believe," Kelley wrote in a note.

Kelley estimates Boyd has roughly 14 months of liquidity at its current cash burn rate. In addition to its balance sheet, Boyd owns roughly 85% of its properties, which helps mitigate risk during the shutdown. Finally, Kelley said Boyd's regional casinos could be quicker to recover than Las Vegas casinos given Vegas' size and status as a tourist destination.

Bank of America is projecting a 2020 EPS loss of $3.02 on $1.69 billion in revenue, down 49.2% from a year ago. However, Kelley is projecting a sharp recovery in 2021, including an EPS loss of just 18 cents and 71.2% revenue growth

Bank of America has a Buy rating and $22 price target for BYD stock.

Year-to-date chart courtesy of TradingView. PENN = blue, BYD = orange

The Penn National Bull Case

Penn National operates 41 gaming properties, including casinos, horse racetracks and off-track wagering facilities.

Penn's willingness to embrace online gambling, particularly in Pennsylvania, has it well-positioned for the future of the gaming business. Online gambling was on the rise even before the COVID-19 casino shutdowns, but the latest developments likely have many states taking a closer look at legalizing online casino alternatives.

In addition, Penn management said it expects to be a major player in the emerging U.S. sports betting business. Earlier this year, Penn made an aggressive $136 million investment in a 36% ownership stake of sports blog Barstool Sports. Stifel analyst Steven Wieczynski recently said potential sports growth is the key to Penn's future.

Related Link: How Trading In Ford, GE And Other Volatile Stocks Could Be Linked To Casino Closures

"The company continues to expect to be a leading force in the emerging US sports betting business, noting it believes it can be a top-three share player and achieve the highest margins in any market it enters," Wieczynski wrote in a note.

As of March 31, Penn has $2.89 billion in total debt and $730.7 million in cash on hand. On Tuesday, Penn announced a $250 million common stock offering and a $250 million convertible note offering.

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Stifel has a Buy rating and $37 price target for Penn.


Both Boyd and Penn are bets the U.S. gambling industry will recover from the current shutdown in the long term.

Penn may be a higher-risk, higher-return play for more aggressive investors given its focus on growth avenues like online gambling and sports betting, whereas Boyd is a more conservative play due to its solid balance sheet and property ownership.

Which stock do you think has a better chance to outperform? Email with your thoughts.

Latest Ratings for BYD

Date Firm Action From To Apr 2020 SunTrust Robinson Humphrey Maintains Buy Apr 2020 JP Morgan Maintains Overweight Apr 2020 Morgan Stanley Maintains Overweight

View More Analyst Ratings for BYD

View the Latest Analyst Ratings

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