Betting giant Entain PLC (LSE:ENT)’s strategy to crack the US market is delivering the goods, reckon analysts following today’s third-quarter trading update.
Richard Hunter, head of markets at interactive investor, stated: “Entain’s gamble to conquer overseas markets in addition to its core UK offering is showing signs of paying off, with potentially the largest target of all exhibiting particular promise.”
Entain’s joint venture in the US, BetMGM, has become earnings-positive and now holds a 15% market share in the country, including a 22% share in the growing iGaming segment.
That is despite it being “a tough slog for the group to get to this stage, where promotional investment has been something of a necessary headwind”, said Hunter.
Net Gaming Revenue (NGR) for the group increased by 8%, with 18% growth in BetMGM’s NGR alone.
But challenges remain.
Regulation continues to be “an intractable thorn in the side for gambling companies, and Entain is certainly no exception”, said Hunter.
“The spectre of regulation is a constant threat, with problem gambling being an easy political target in any of the jurisdictions in which the group operates.
There is also the possibility of Labour Chancellor Rachel Reeves targeting the UK gambling sector with windfall taxes at the upcoming Autumn Budget.
Shore Capital Markets analysts highlighted this in their coverage today.
Although they acknowledged that Entain’s earnings multiples suggest the company is undervalued, “risks around the gambling tax in the UK budget will likely weigh near-term”.
The stock, which added 4.5% to 743.8p today, is a buy nonetheless, said Shore Cap.