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Buy Penn National Gaming as it benefits from pent-up demand for experiences, Barclays says

Penn National Gaming will benefit from pent-up demand for experiences even as consumer spending slows, Barclays says. “We view PENN as a well-operated, diversified U.S. regional casino company, with a digital sports and gaming business that is closer to profitability than any of the other major operators, and a robust omni-channel strategy that should eventually reinforce its core business,” analyst Brandt Montour wrote Tuesday in a note to clients. “In the meantime, we expect regional gross gaming revenue to hold up better than broader consumer discretionary, and PENN shares look attractively valued relative to that outcome,” he added. Montour initiated coverage of the gaming stock and several other travel names with an overweight rating, noting that Penn will continue to maintain consistent cash flows from its casino business even as the consumer softens. Meanwhile, the return of older crowds and demand for experiences and social interaction following Covid-19 lockdowns could also prove a strong tailwind for the gaming stock, he said. “More generally, casinos offer a unique experience that not only have historically demonstrated relative resiliency vs. broader consumer discretionary spend during macro slowdowns,” Montour wrote. Along with Penn, Barclays initiated coverage of Caesars Entertainment , Hyatt Hotels and Royal Caribbean with overweight ratings, companies that “combine durable and growing cash flows with compelling valuations.” Based on Barclays $37 price target, Penn’s share can rally another 16% in the near term. The stock is currently trading down about 39% on the year and more than 63% off its 52-week high. — CNBC’s Michael Bloom contributed reporting

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