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Analysts at JMP Securities believe Hard Rock could be a potential buyer if Penn Entertainment opted for a sale, but it is “more complicated” than it first appears.

The analysts weighed in on whether a sale of Penn’s assets could unlock value for shareholders, but noted that a sale would be difficult due to a small buyer pool in the current macroeconomic environment.

Splitting the assets

If the assets were split, “a buyer of the casino assets would need enough scale to drive synergies from Penn’s regional portfolio.

“For a buyer of online gaming, history suggests it takes at least several years to build a successful online business, a large amount of capital, and a perfect strategy to run the sports betting and iGaming businesses together,” JMP noted.

Furthermore, they believe that if a buyer shutters the sports betting business and cuts ties with ESPN, “separating the brick-and-mortar casino database from the iGaming business would create dis-synergies.”

Penn’s value

Earlier this week, activist investor and Donerail Group managing director William Wyatt highlighted “significant strategic failures” at Penn Entertainment and called for the sale of the company.

Wyatt suggested that Penn’s casino assets alone could value at more than twice the company’s current market capitalisation of $2.2bn.

He estimated Penn’s overall worth to be between $5.9bn and $6.9bn.

Analysts at JMP said: “The view that Penn’s shares are undervalued at 5.2 times estimated 2025 consensus EBITDA, with online creating negative equity value, is a well-known thesis at this point, and we do not disagree with the value described in the letter for the brick-and-mortar business.

“The issue presented is how does the company stand to unlock that value with its 4% sports betting market share and 2% share in iGaming with the current losses and future capital commitments.”

Buying the entire company

The analysts believe that a potential buyer planning to operate both casinos and online gaming “at the price point highlighted in the letter would need a deep understanding of gaming in the United States.”

According to JMP, companies with the financial capacity to fund an acquisition of Penn include MGM Resorts and Caesars Entertainment.

However, Penn’s regional assets are said to be non-core for MGM, along with Las Vegas Sands and Wynn Resorts. Meanwhile, Caesars is still digesting the merger with Eldorado.

The analysts also stressed that Churchill Downs does not fit strategically, as it exited online gaming, and Boyd Gaming “would need to be comfortable with sports betting (or shutter it).”

Potential buyers

So, who are the potential buyers?

Private equity would be a “logical choice”, but Hard Rock, in JMP’s view, could be a buyer for the entire enterprise.

“The company is flush with cash, has an already established regional gaming portfolio throughout North America (synergies), and an online business it can build out, including a monopoly on sports betting in Florida.

“The online business would provide Hard Rock with a deeper footprint in U.S. iGaming, along with the associated technology (theScore), a core focus for the company.

“Lastly, cross-sell opportunities between its footprint in Las Vegas (reopening 2027), regional casinos, and international markets would create synergies, while further expanding internationally through theScore in Ontario,” JMP stated.

JMP maintained its market perform rating, arguing that Penn’s shares are trading at 5.2 times estimated 2025 EBITDA, compared to 7.2 times for regional gaming companies.

This valuation gap is consistent with historical trends, as Penn does not own its real estate.

The company is trading slightly below its historical average from a free cash flow perspective.

“Thus, we continue to see Penn as fairly valued,” JMP concluded.

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