PENN stock may be down almost halfway from its high-water mark. Yet, placing a wager on Penn National’s (NASDAQ:PENN) rebound is far from a sure thing. Yes, it does have big exposure to the iGaming (online casinos and sportsbooks) megatrend. Its land-based casinos are also set to recover. But even after its big decline, both factors are likely accounted for in its valuation.

Particularly the iGaming one. The company was shrewd in acquiring a large stake in Barstool Sports, using the brand for its sportsbook operations. Even so, though, it’s debatable how much of this fast-growing market Penn can capture. Recent stats point to it being an “also ran” name.

And as for its land-based casinos? Investors have already priced in the Covid-19 recovery. Yet, with cases of the Delta variant rising, we could see a repeat of the disruption its brick-and-mortar operations saw in 2020.

So, fairly valued at today’s prices — and with factors that could cause it to drop some more — it may be best to wait for a pullback before buying PENN stock.

The Rise and Fall of PENN Stock

First off, let’s look at the one factor that sent PENN stock “to the moon” from mid-2020 to early 2021: the hype surrounding Barstool Sportsbook.

If you can recall, this stock was hammered when the pandemic first took hold in March 2020. Shares went from the high $30s to prices well under $5 per share. But after that cratering, PENN stock began an epic run on the heels of its iGaming operations rollout.

Given Barstool’s existing fan base, investors believed the company would crush the competition — even as this competition was made up of first movers like Draftkings (NASDAQ:DKNG) and Fanduel (owned by Flutter Entertainment (OTCMKTS:PDYPY)). Not to mention, well-capitalized casino operators like MGM Resorts (NYSE:MGM) and Caesars Entertainment (NASDAQ:CZR).

Adding fuel to the fire was the emergence of Barstool founder Dave Portnoy as a day trading guru. This likely helped make PENN stock even hotter among retail investors on platforms like Robinhood — folks who started trading online during the lockdowns.

Of course, the enthusiasm for Penn National carried on into this year, as what started off as the “Robinhood effect” morphed into the Reddit “meme stocks” phenomenon. As a result, the stock climbed to (and for a while stayed at) a “priced for perfection” valuation.

However, following the peak of these trends, shares took a sharp dive. Since February, Penn National has fallen from a high of $142 per share to around $70 today. At current prices, it’s reasonably priced compared to peers. Yet, that may not mean another move lower isn’t in the cards.

From Overvalued to Fairly Valued

Following its extended pullback, PENN stock now trades at a more reasonable valuation. Using the enterprise value to EBITDA (EV/EBITDA) metric, it currently trades at a forward EV/EBITDA ratio of 10.63 times. That is, expected EBITDA over the next twelve months. This is on par with similar regional names like Boyd Gaming (NYSE:BYD), which trades at a ratio of 10.28. It’s also slightly below the forward EBITDA multiple (12.93) for Bally’s (NYSE:BALY).

Add in the growth potential for Barstool and this valuation appears to be more reasonable. But a fair valuation may only mean shares have a little more to fall from today’s prices. Worse yet, there are some factors that could lead to further downside.

First, there’s the risk that Barstool Sports fails to scale into a sportsbook operation on par with Draftkings and Fanduel. In its initial market of Pennsylvania, it’s far behind these established rivals. Likewise, its market share has dropped off dramatically elsewhere. This may foreshadow future disappointment as it enters other states.

Secondly, there are the land-based operations. Pent-up demand and the “reopening” may point to strong results for now. However, depending on how the Delta variant plays out in the States, we could see a repeat of the stringent protocols we saw in 2020.

Wait For Another Pullback in PENN Stock

The hype surrounding Penn National shares has considerably evaporated. Of course, the good news from this is that shares trade at a more reasonable valuation. This may point to the stock holding steady in the months ahead.

Yet, it’s not a lock that shares won’t take another dive. Subsequent results from iGaming could disappoint. And if the Delta variant does more damage to the “reopening trade” narrative, it could drive a further move lower as well.

So, fairly priced but not yet undervalued, what’s the best move with PENN stock? Wait for another decline to knock it down to a discounted valuation. At a much lower price, it may be a worthwhile play.

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On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.