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Penn Entertainment (NASDAQ:PENN) shares rose 4% Friday after JPMorgan changed the casino operator to"overweight" from "neutral," pointing to the possibility for notable expansion as new investments to kickstart a rebound. From the intraday price of $20.81, the company also increased its price target on thestock to $27 from $19, reflecting a possible upside of around 30%.
With projections of double-digit cash-on-cash returns starting in the later part of 2025 and running into 2026, JPMorgan analysts said in a note to clients that Penn's retail investments are beginning to "bear fruit." Theyalso observed a favorable view of the company's free cash flow, which they hope to get better when land-based capital expenditure drops drastically by 2026. The analysts stressed Penn's capacity to direct this cash flow toward debt reduction and interest expense lowering.
Another element supporting their optimistic view was the declining interactive gaming losses, according to the paper. Penn's stock is down around 20% year-to-date despite Friday's gain, which reflects more general difficulties in the gaming industry. But JPMorgan's upgrade and the new price target point to hope for the company's longer-term financial recovery and expansion possibilities.
This article first appeared on GuruFocus.