Entain PLC's (LSE:ENT) first-half results show solid growth and stronger-than-expected momentum, especially online, though the shares fell 2.3% to 9.15p on profit-taking after a strong performance in the year-to-date.
Shore Capital described the earnings before interest, tax, depreciation and amortisation rising 11% to £583 million as comfortably beating expectations.
Digital revenues led the way, increasing 8% on a constant currency basis, with the UK and Ireland and Brazil markets each growing by 21%. Retail sales were flat but slightly better than expected.
The US joint venture BetMGM turned profitable, contributing to a sharp rise in earnings before tax to £314 million, about double last year’s figure.
The company raised its full-year guidance for digital revenue growth to 7%, with profit margins nudged higher and forecast adjusted EBITDA between £1.1 billion and £1.15 billion.
Despite this strong performance, the shares slipped, trading on valuation multiples that ShoreCap sees as conservative and suggesting further upside could be possible.
Peel Hunt is also upbeat on the prospects for the stock, largely based on its goal to generate free cash flow of over £500 million, which currently translates into a healthy yield of around 8%.
It also expects the company’s strong earnings from its UK and Ireland online business, which makes up about 19% of group profits.
For these reasons, it's sticking with its 'buy' recommendation and 1,100p price target.