Entain PLC (LSE:ENT), the betting firm that owns Coral and Ladbrokes, could have its profits damaged this year as the UK government gambling white paper looms, Jefferies reckons.
The US bank has dropped its 2023 underlying earnings predictions by 2% from £1.04bln to £1.02bln.
Jefferies’ earnings per share (EPS) estimates for 2023 and 2024 fell too, by 5% and 7% respectively.
A driving factor for these changes is rooted in the upcoming government review of the sector, which could see regulatory changes across the UK market as it aims to shore up affordability checks for customers.
“Entain is expected to lap the implementation of these restrictions in the second half of 2023,” the New York bank said.
Increased interest costs and higher taxes are behind the reductions to EPS forecasts, explained Jefferies.
Analysts continue to reiterate that the developing US betting market will be lucrative and that further legislation there will only drive growth.
The British company partnered up with the US resort and leisure firm, MGM, last year in a 50/50 joint venture called BetMGM.
It is a US-based sportsbook operator, currently on track to become profitable in 2023 and Jefferies believes it could be a “key sector catalyst”.
Entain has remained closely linked with MGM over the last year after reports of a potential merger between the two were highlighted.
However, MGM announced in February it was moving on from a potential purchase of Entain - ‘for now’.
Jefferies has dropped its price target to £18.05 but the estimate still offers close to a 50% upside compared to Wednesday's opening value of £12.36.