The twists and turns of the FIFA World Cup, including the U.S. team’s nail-biting win against Iran and Saudi Arabia’s stunning victory over Argentina, is good news for sports betting giants.
British sports betting and gaming group
(ticker: ENT.UK) is one of those set to benefit from the most-watched global sporting event. But the FTSE 100 company has a lot more going for it than a short-term soccer boost, and it may be time to consider betting on the stock.
Entain employs more than 25,000 people and operates in 31 territories in 20 offices across five continents. It owns a number of brands, including Ladbrokes, Coral and PartyCasino, and has a joint venture—BetMGM—with
MGM Resorts International.
Its extensive portfolio across Europe, in particular, means Entain sees net gaming revenue growing by a high single-digit percentage in the final three months of the year, due to the World Cup. It expects to return to mid single-digit growth the following quarter.
But the growth opportunity in the U.S.—one of the host nations of the next World Cup, in 2026—can keep the momentum going. In fact, BetMGM makes the company well placed to benefit from the burgeoning U.S. sports betting market.
That’s something the market hasn’t yet fully priced in. The stock trades at 17.6 times 2023 earnings, a 40% discount to FanDuel owner
There’s no guarantee, of course. California overwhelmingly voted to reject a ballot proposition legalizing sports betting in November. But sports betting is now live in 31 states, and legal but yet to launch in another five, according to the American Gaming Association.
expects BetMGM to triple revenue to $3 billion by 2025, turning profitable next year. The bank’s analysts, led by Louise Wiseur, said Entain’s current share price “significantly undervalues” the U.S. opportunity and the online business. They have a Buy rating with a target price of 17.70 pounds sterling ($23.23), implying a 34% gain from a recent £13.17.
Analysts are generally bullish on the stock—90% of those covering the shares rate them Buy, with an average target price of £18.44, according to FactSet data.
The company, with a market value of £8.2 billion, expects Ebitda for the full-year 2022 to be between £925 million and £975 million, or 5% to 10% growth. The years ahead could see growth accelerating, with analyst estimates forecasting £1.06 billion Ebitda in 2023, £1.16 billion in 2024 and £1.25 billion the year after. The company’s sales, set to break the £4 billion barrier for the first time this year, are expected to top £5 billion by 2025, according to estimates.
Outside of the U.S., the company is also growing. Entain completed its acquisition of Croatian gaming and sportsbook operator SuperSport at the end of November and is expected to close the purchase of Dutch sports betting brand BetCity by the end of the year.
Expectations for BetMGM to turn profitable next year implies a pivot to “much higher net cash generation that should validate the acquisitions strategy and the investment in the U.S.,” Peel Hunt analysts, led by Ivor Jones, said. They have a Buy rating and a £19 target price.
The threat of increased regulation in the key U.K. markets remains a risk. A government gambling review has been postponed several times this year, largely due to political upheaval. The eventual outcome of the review will lift uncertainty and could be a positive for the stock.
Even if the review has some nasty surprises, the growth opportunity in the U.S. and the undervalued stock means Entain may be a gamble worth taking.