Entain PLC (LSE:ENT), the owner of Ladbrokes and Coral, was 9% lower on Monday after disappointing investors with a warning that revenue growth has been slowing in 2023, but City analysts are not writing the stock off yet.
Revealing that online net gaming revenues (NGR) in the third quarter were now set to decrease by a “high single-digit” percent year-on-year because of adverse sporting results and tighter-than-expected regulation in the UK, the gambling firm now forecasts “low single-digit growth” in full-year online revenues.
Retail performance from its bookies is expected to take up the slack from this reduction and analysts at Shore Capital confirmed that “recent acquisitions (particularly SuperSports in Croatia) are said to be performing strongly, and BetMGM NGR is expected to be at the top-end of guidance, with positive EBITDA in H2”.
The FTSE 100 group reiterated its underlying profit guidance of between £1 billion-£1.05 billion, with analysts edging towards the lower end of this forecast.
Shore Capital Group (LSE:SGR) added: “We see a better than anticipated performance from Retail and acquisitions supporting this, although we question at this stage the assumed Q4 performance and whether profit performance is also being supported by reduced marketing and investment, which would impact growth further out.”
Analysts at Peel Hunt Ltd (AIM:PEEL) pointed to Entain’s third-quarter update at the start of November for a clearer picture of the situation to emerge, with an update on “simplification of group structures and operations to.... reduce costs" expected.
“Today's announcement is an unwelcome surprise from a company that has generally delivered positive momentum. We will revisit the valuation, but our initial view is that many of the core attractions remain intact,” Ivor Jones, an analyst at the investment group, added.
Both brokers reiterate their ‘buy’ ratings for Entain and Peel Hunt targets a share price of 1,700p.
Shares in Entain are down close to 30% in the year-to-date and opened on Monday at just over 1,000p.