Low Expectations = A Risky Opportunity

As I have heavily stressed before, earnings season can be a highly profitable time, or a time full of sorrow, usually the latter. Because of said latter, I often advise that it might not be worth the risk unless you are using a strategy that favors big swings, but that usually requires high levels of capital. One stock that I will be watching tomorrow is Penn National Gaming (PENN). The casino industry has made strides in its reopening, but is not seeing anywhere close to the traffic it once received. This has lead to a poor outlook for the stock as Zacks Consensus Estimate predicts an 82.4% decline in revenue for Penn compared to this quarter last year.

A hefty estimation for a loss such as the one that Penn is looking at headed into tomorrow, could result in a huge jump in the stock if they beat this estimation in any way. With great pessimism comes massive content with mediocrity. If Penn finds a way to only post for say a 50% decline, investors may see this as a win. The stock has seen a decent run up heading into its earnings tomorrow, with an almost 3% rise at the end of today, which I find somewhat surprising with so much expected downside.

I always say its probably better to avoid earnings, but I also strongly believe it never hurts to take a chance!

-Darnel Shillingford

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