Posted on: November 1, 2023, 06:10h.
Last updated on: November 1, 2023, 06:10h.
Entain Plc (OTC: GMVHY), experiencing a significant decline in market value this year, has several potential strategies to reverse its course.
This perspective is shared by Susquehanna analyst Joseph Stauff, who recently initiated coverage of Entain and gave it a “positive” rating, with a price target suggesting a 17% upside potential. Stauff highlighted two attractive paths for the company, with one option being a renewed focus on organic growth outside of the US.
Entain currently holds a 50% stake in BetMGM, which provides the company with exposure to the US market. Outside of the US, Entain has relied on acquisitions to drive top-line growth, although some of these have faced criticism from investors. By prioritizing organic growth and gaining market share without relying on deals, Entain could potentially please investors.
In September, Entain’s shares declined after the company provided a disappointing forecast for net gaming revenue (NGR) in 2023, citing weak performance in online gaming and slow growth in Australia and Italy.
BetMGM Partnership as a Solution
Another route for Entain to restore investor confidence and accelerate growth is through reaching 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.
The details of such a compromise were not provided by the analyst, but one possibility would be for Entain to sell its 50% ownership in BetMGM to partner MGM Resorts International (NYSE: MGM). This transaction would likely generate substantial profits for Entain, and MGM has expressed interest in gaining full control of the online sportsbook operator.
Speaking at the Global Gaming Expo (G2E) in Las Vegas, Entain CEO Jette Nygaard-Andersen mentioned that joint ventures are not permanent, suggesting that BetMGM’s ownership structure could change in the future.
Potential Sale of Entain
Entain’s market capitalization has significantly decreased, falling to $7.22 billion, a decline of 31.20% year-to-date. This is well below the $11.06 billion offer made by MGM to acquire the company in January 2021, and a fraction of the $20 billion proposal from DraftKings (NASDAQ: DKNG) later that same year.
Over the past few years, Entain has frequently been viewed as a possible acquisition target, and analysts have speculated about potential suitors. With a market cap of $7.22 billion, Entain is now an attractive prospect for numerous interested parties.
However, Nygaard-Andersen has not expressed an interest in selling the company, and recent acquisitions suggest that Entain is more inclined to be a buyer than a seller.