Investors in Entain PLC (LSE:ENT), owner of bookmakers Ladbrokes and Coral, will be hoping its first quarter trading update, due Tuesday 18 April, can help lift its deflated share price.
The stock has drifted around 15% lower in the last year, with around a 4% decline in the year-to-date, while rival Flutter, which owns Paddy Power and Betfair, has seen its share price rocket close to 80% since this time last year.
Entain's share price, which values the company at around 10 times full-year earnings, suggests the market is “giving little credence to the long-term structural opportunities of the global gambling industry, especially in the US", said analyst Greg Johnson at Shore Capital.
He said this partly reflects numerous recent headwinds that saw growth slow last year but sees these as “set to unwind" and growth expected to accelerate through the end of 2023.
The slowing of growth last year for the FTSE 100-listed group was mainly online, which reflected a Covid-related boost the year before and regulatory changes in some major markets, while another headwind was a £17mln Gambling Commission penalty in August “for social responsibility and anti-money laundering failures”.
However, Britain’s gambling white paper still looms, with many expecting tighter affordability checks and areas like sponsoring football to come under scrutiny.
The review, which is meant to be a complete overhaul of the Gambling Act 2005, does not have a set deadline but has been touted for a 2023 release.
Another aspect of intrigue for investors is how Entain’s US sportsbook has fared on its journey to profitability, with BetMGM launched in early 2022 as a joint venture with US casino giant MGM Resorts International (NSX:MGM).
Entain had previously stated that it expected BetMGM to post an underlying profit by the second half of 2023, so any indications of growth in the first quarter will be important.
Then there is the wider topic of a takeover, with the company already rejecting offers from both MGM and DraftKings over the last few years.
MGM ruled out a future takeover bid in February after the group’s president, Bill Hornbuckle, stated he had “moved on”.
Yet, the boss added “for now” – something that may keep investors’ hopes up ahead of results.