Analyst Advises Entain to Seek Compromise with BetMGM

Posted on: November 1, 2023, 06:10h. 

Last updated on: November 1, 2023, 06:10h.

Entain Plc (OTC: GMVHY), with its declining market value, faces two potential paths to reverse course, according to Susquehanna analyst Joseph Stauff.

The BetMGM logo. An analyst suggests half owner Entain find some form of compromise with the online sportsbook operator. (Image: NY Sports Day)

Susquehanna analyst Joseph Stauff initiated coverage of Entain today with a “positive” rating and a price target implying potential upside of 17%. Stauff highlighted two paths for the stock, including a renewed focus on organic growth outside of the US.

Entain’s US exposure is through its 50% stake in BetMGM. While the operator has used acquisitions for growth, an emphasis on organic growth outside of the US could please investors.

In late September, Entain shares declined due to a disappointing 2023 net gaming revenue forecast and slow growth in Australia and Italy.

BetMGM Deal Could Benefit Entain

Another option for Entain to boost investor confidence and growth is to reach a compromise with BetMGM.

(That would) release its inflexible operating structure that we think needs to occur in the near-term before risking a more permanent step-function decrease in market share,” noted Stauff.

Stauff did not provide specific details on the compromise, but one possibility would be for Entain to sell its 50% ownership in BetMGM to partner MGM Resorts International (NYSE: MGM). Such a transaction could generate significant returns for Entain, as MGM has expressed interest in controlling the entire iGaming and online sportsbook operator.

Entain CEO Jette Nygaard-Andersen indicated at the Global Gaming Expo (G2E) that joint ventures have a limited lifespan, suggesting that BetMGM’s ownership structure may change in the future.

Potential Sale of Entain

With a year-to-date decline of 31.20%, Entain’s market capitalization has fallen to $7.22 billion, well below previous acquisition offers. Speculation regarding Entain as a takeover target may increase given its current market cap.

However, Nygaard-Andersen has not expressed interest in selling the company, and recent acquisitions suggest that Entain is more likely a buyer than a seller.

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