3 Reasons Why I'm Loading Up on Penn Entertainment in the Second Half of 2026

Consumer cyclical stocks are disappointing investors this year. The S&P Consumer Discretionary Select Sector Index, a collection of the largest consumer discretionary companies, is off 3.8% year to date.

It's not all bad news, as some of the group's smaller names are turning in scintillating 2026 showings. Penn Entertainment (NASDAQ: PENN) is a prime example. The casino stock is up 48.3%, making it one of the best performers in the group.

Penn Entertainment is soaring and it could extend those gains in the second half of the year. Image source: Getty Images.

A 48.3% jump in just six months prompts investors to wonder whether there's more gas in the tank. Specific to Penn, multiple tailwinds could drive second-half gains. Here are three to consider.

Reason No. 1: Regional casinos are strong

There's still chatter about Las Vegas's health, and whether recovery there is a second-half 2026 or 2027 story. What's not up for debate is that even amid elevated inflation and high gas prices, regional casinos aren't being pinched on par with their Strip counterparts.

For investors evaluating Penn stock, customer resilience is relevant because the company recently completed enhancements at some of its marquee properties. Just this month, Penn opened a new hotel tower at the Hollywood Casino in Columbus, Ohio, while debuting the Hollywood Casino and Hotel in Aurora, Illinois.

The latter was formerly a riverboat casino. By coming ashore, former riverboat casinos can add gaming space and other amenities. The Aurora project follows another Illinois riverboat-to-shore transition, the Hollywood Casino Joliet, which wrapped up last September.

The point is Penn is freshening up its roster in a state that's one of the largest U.S. gaming markets outside of Nevada. That's one reason why some analysts say Penn's regional casino business is at an "inflection point."

Reason No. 2: The interactive business is improving

Following sports betting missteps, Penn is more focused on internet casinos, leveraging its Hollywood brand. That's good news for investors. The digital unit lost $268 million in 2025, but that loss is expected to dwindle to $20 million this year, indicating that Penn is getting it right with digital gaming.

If interactive losses moderate to that extent or if Penn gets to breakeven or even a slight profit, that'd likely be a spark for the stock.

Another benefit of the iGaming-first strategy is that Penn can tailor advertising to just four states. That's more cost-effective than spending at the national level on sports betting.

Reason No. 3: Industry consolidation

It's no secret that the casino industry is awash in consolidation as both Caesars Entertainment and MGM Resorts International are takeover targets. Penn is benefiting from that trend, and not because it's considered a buyout candidate itself.

First, the offers for Caesars and MGM imply Penn is worth more than its current market price. Second, if both of these companies are taken private (the offers on the table would do just that), that would reduce the pool of casino stocks, putting more focus on holdovers such as Penn.

Third, put this one in the wait-and-see column. Penn might be able to acquire a Caesars venue or two at favorable pricing because it's widely expected that some asset sales will take place due to geographic overlap with Tilman Fertitta's Golden Nugget.

Add it all up, and Penn stock could keep the good times rolling in the second half.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.