Stifel hikes Penn National price target by 80%, says 'Portnoy Momentum' will keep driving the stock

Published Thu, Sep 17 20208:22 AM EDTUpdated Thu, Sep 17 202012:50 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). The Barstool boost for Penn National Gaming won't slow down anytime soon, investment firm Stifel said in a new a note to clients. The gaming company made a significant investment in Barstool Sports , a sports media company led by Dave Portnoy, earlier this year, and has seen its stock soar. Stifel, which has a buy rating on the stock, significantly raised its share price target and said that as much as half of Penn's current stock price may be attributed to Barstool. "At this point, we believe investors have attributed $25-$35 of equity value per share to PENN's Barstool acquisition and the long-term opportunity it could present," the note said. The "Portnoy Momentum Trade" still has room to run, the note said. Stifel hiked its price target to $85 per share from $47. Penn closed just below $68 per share on Wednesday, so Stifel's new target represents a 25% premium. With major sports shut down over the summer due to the pandemic, Portnoy pivoted to day trading. He has said he would focus on sports again when they returned. Penn's stock has gained more than 80% since the January announcement of a large stake in Barstool. Stifel said the jump doesn't make sense from a traditional valuation standpoint, but the momentum is undeniable. "Although the valuation might appear stretched when evaluated against historical norms, we view PENN as a 'story' stock at this point, and thus find valuation less important to our overall investment thesis," the note said. One positive for Penn's financials could be the budget holes facing state and local governments. Stifel said that up to 10 states could legalize sports betting or online gambling in the months ahead as they search for tax dollars. The firm estimates that Penn's sports betting/iGaming segment alone is worth $40 per share. Correction: Stifel raised its price target on Penn to $85 per share. A previous version misstated the target. The headline was also changed to reflect the correct target.

David Portnoy, Barstool Sports

Scott Mlyn | CNBC

(This story is for CNBC Pro subscribers only).

The Barstool boost for Penn National Gaming won't slow down anytime soon, investment firm Stifel said in a new a note to clients.

The gaming company made a significant investment in Barstool Sports, a sports media company led by Dave Portnoy, earlier this year, and has seen its stock soar. Stifel, which has a buy rating on the stock, significantly raised its share price target and said that as much as half of Penn's current stock price may be attributed to Barstool.