12:04 PM EDT, 05/13/2024 (MT Newswires) -- Penn Entertainment's ( PENN ) shares are "now more of a deep value turnaround than a growth opportunity" and, in the absence of a big acceleration, the company is poised for "higher for longer" losses that can significantly impact Q4 and 2025 projections, BofA Securities said in a note Monday.

ESPN Bet's $1 billion cost structure seems excessive given its current revenue, which is too low due to weaker-than-expected spending resulting from a larger number of casual customers and an ineffective product mix, according to the note.

BofA said the company's investments in ESPN Bet and land-based projects have sharply increased its leverage and inflation is eroding profits at a faster rate compared to peers.

Despite stable core gaming operations, any decline in Penn's gaming business could become a major risk for the company, the firm added.

BofA lowered its rating on Penn's shares to neutral from buy and reduced the price objective to $17.50 from $28.

Price: 16.11, Change: +0.03, Percent Change: +0.16