Flutter Entertainment PLC (LSE:FLTR) and Entain PLC (LSE:ENT) shares were under pressure on Friday as Barclays cut profdit forecasts due to an uptick in competition in US markets and several other headwinds.
With more players flooding the US betting market, Entain, which owns half of BetMGM, and Flutter, which owns market leader FanDuel, are seeing the valuations of their Stateside business diminish.
Group EBITDA forecasts for Flutter, which also owns Sky Bet and Paddy Power, were cut by 3% by the bank, while Ladbrokes-owner Entain had its earnings forecasts reduced 7%.
Entain
In Entain’s case, the reduction was also implemented because of unfavourable sporting results in the third quarter, which resulted in a 19% EPS cut.
Moving into 2024, the Coral owner is expected to pump more cash into the BetMGM venture to help recover market share.
Barclays rates the stock ‘overweight’ but has cut its price target by 16% to 1,120p – still a 30% upside.
“We have been wrong on our OW rating of Entain. The EPS downgrades have been disappointing (most of all the underperformance in core markets) but at these share price levels, the stock presents attractive value with activist interest,” analysts at the UK bank said.
“It will take time for the market to rebuild earnings momentum and trust with the market, while leverage is quite high and cash generation low.”
Flutter
International sporting results and headwinds in India and Australia have caused issues for Flutter’s earnings going forward.
Underlying profit forecasts for 2024 have been slashed by 5% to account for tax headwinds in India and several regulation changes in Australia including a credit card deposit ban.
This has been offset by predictions of strong momentum in UK operations and a £30 million boost from the MaxBet acquisition.
Barclays has lowered its price target for Flutter by 4% to £153, representing a 20% upside to the current share price.
“We maintain an EW rating as we think the US multiple will remain challenged over the next 6-12 months with more intense competition,” the analysts concluded.