What happened

Shares of casino operator Penn National Gaming (NASDAQ:PENN) rose roughly 12.5% in the first half-hour of trading on Thursday. They then promptly gave back almost all of that gain before heading higher again. By roughly noon EDT today, the stock was holding on to a gain of around 10%. This type of volatility isn't shocking, given that Penn National is up an incredible 150% so far in 2020, easily outdistancing most of its peers. 

So what

During the early part of the 2020 recession, Penn National fell sharply along with its peers. The big concern was that the shutdowns of nonessential businesses in order to slow the spread of the coronavirus would be bad for casino companies. It was: Penn National reported a per-share loss of $1.69 in the second quarter. But when its shares started to recover, along with many of its peers, the focus shifted from its physical casino plans to its digital plans.  

A woman at a slot machine

Image source: Getty Images.

That makes sense, since reaching customers online when you can't get them into your casinos (at least not in the same numbers) is a very positive development.

Only Penn National isn't just offering casino games; it has partnered with Barstool Sports to expand into online sports betting. That relationship has resulted in a number positive reviews of the stock on Wall Street. Another upbeat analyst call, this time from Rosenblatt Securities, came out today. That company's coverage of the stock was initiated with a buy rating and an $80 per share price target.   

Now what

Penn National's online strategy is exciting. But at this point, the stock has moved dramatically higher in a very short period. Moreover, it has vastly outdistanced both the broader market and its peers. Long-term investors should tread cautiously, since it looks like a lot of good news is baked in here. Indeed, it wouldn't be surprising to see investors take some profits, something that the volatility in early trading today perhaps hints at.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.