Penn National fell out of the S&P 500 for one of America’s largest institutional owners

The S&P 500 will shed some of its sports betting bet in favor of a different business: home rentals.

S&P Dow Jones Indices announced late Friday that it will replace Penn Entertainment Inc. PENN,
+2.45%
in the S&P 500 SPX,
-1.07%
with Invitation Homes Inc. INVH,
-0.22%,
one of the nation’s largest institutional owners. Penn joined the index in March of last year with fellow casino operator Caesars Entertainment Inc. CZR,
+0.24%,
but now it’s involved in a similar two-pronged move in 2022 into real estate — CoStar Group Inc. CSGP,
+1.29%,
which provides services to the real estate industry and owns websites including ApartmentFinder.com and Apartamentos.com, will join Invitation Homes in the S&P 500.

Shares of Invitation Homes and CoStar Group surged in after-hours trading Friday, gaining 5% and 6.5%, respectively. Penn stock was less than 1% higher in late trading, while shares of PVH Corp. PVH,
-2.31%
— which will join Penn in a relegation to the S&P Midcap 400 — were steady. Changes will be made before the bell on Monday 19th September.

Penn had a market capitalization of more than $16 billion when it was added to the index last year after investing in Barstool Sports and making the sports site the face of the online gambling push, but that valuation had fallen to less than $5 billion by Friday’s close. The casino owner’s net income fell more than 70% in the first half of the year amid rising expenses, but executives expect revenue to rise nearly 7% to reach $6 billion for the first time in 2022.

See also: Americans have bet $125 billion on sports since legalization push began

Invitation Homes buys single-family homes in the U.S. and rents them out, making it the most valuable real estate investment trust, or REIT, in the single-family rental sector. The company collected $1.83 billion in rental income last year and netted a total of $261 million in net income. Analysts expect those numbers to top $2 billion and $400 million this year, according to FactSet.

Institutional buyers have dominated the property market since the 2008 financial crisis, and some specialize in detached single-family homes, which make up about a third of the country’s rental housing stock. A recent study by Harvard’s Joint Center for Housing Studies found that single-family home rents rose by record amounts for 12 consecutive months through March 2022.

For more: Institutional investors have bought hundreds of thousands of homes. Is it creating a “renter generation”?

Morgan Stanley analyst Adam Cramer argued last week that institutions only own up to 500,000 of the 17 million single-family rentals, giving them the ability to grow big and take advantage of the affordable housing shortage.

“Increasing demand as Generations Y & Z are just now entering their household formation years and are more likely to rent than own, and an already unaffordable housing market that is becoming even less affordable… which when combined with a lack of supply, will force households into the rental market” led Kramer to raise price targets by 8% for Invitation and two competitors, American Homes 4 Rent AMH,
-1.05%
and Tricon Residential Inc. TCN,
+0.15%,
while assuming coverage last as.

S&P Dow Jones Indices also promoted Advanced Micro Devices Inc. AMD,
-2.54%
in the S&P 100 megacap index, replacing DuPont de Nemours Inc. DD,
-0.85%
because DuPont is “no longer representative of the large-cap market space.”

See: How Wall Street and Silicon Valley are exacerbating housing inequality — and how to fix it

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