Entain's share-price weakness overdone, says Citi

(Sharecast News) - Citi has resumed coverage of Entain with a 'buy' rating, saying it see upside potential from the gambling group's US operations. Despite an 18% gain in the past month, shares the Ladbrokes owner have fallen by more than a third over the past year.

In August 2023, the stock took a tumble after its US joint venture (JV) partner MGM Resorts announced plans to launch a UK online betting site, while the company has disappointed with updates about falling online net gaming revenue (NGR). That culminated with the resignation of chief executive Jette Nygaard-Andersen in December.

"Our [sum-of-the-parts] framework suggests no value is being ascribed to ENT's 50% stake in BetMGM (US JV), which we see as overly negative given recent changes to ENT's management (CEO step down), shareholder register (activist investors), and board (Eminence founder now [non-executive director]), which we think is likely to increase ENT's receptiveness to value-unlock opportunities," Citi said in a research note on Thursday.

"We are cautious on its ex-US business with our FY24 revenue estimate at the low-end of guidance, but acknowledge market expectations have been rebased following Entain's downgrades to online NGR growth and expect recovery to be led by UK, Australia, Brazil."

The stock was up 1% at 961.2p by 0953 GMT.