Why Penn National Stock Has Lost Its Luster

In the gambling industry, there isn't a lot of hiding what you are as a company. If a resort is built and people don't visit, that's easy to see. If room rates are low, that's easy to see. If table revenue is lower than the competition, it's easy to find that out. And if people aren't using your online sports betting app as much as expected, investors will soon find out.

When Penn National Gaming (NASDAQ: PENN) became a favorite pandemic growth stock in 2020, it was surprising to me as a longtime gambling industry observer. Penn National has traditionally been a well-run company, but it wasn't in a particularly attractive market position versus companies with exposure to the Las Vegas Strip, Macao, or Japan. It had a partnership with Barstool Sports but didn't have an online gambling business to speak of. Yet share prices of Penn National jumped 238% during 2020 in the hope that it would be a giant in online gambling. The air is quickly coming out of that balloon, and businesses that are taking market share are where investment dollars are flowing.