The share prices of Ladbrokes owner Entain PLC (LON:ENT) and 888 Holdings PLC (LON:888) are not accounting for the “attractive growth characteristics” of the US sports betting and online gaming market, according to analysts at Peel Hunt.
In a note on Monday, the broker upgraded its 2020 forecast for the market as a whole to US$3.1bn from US$2.9bn, saying that the bounce-back from coronavirus (COVID-19) was “greater than we forecast, due in part to the scale of the marketing efforts behind the current land grab in the US”.
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The broker also highlighted that US states that have recently legalised the practice are “beginning to grow strongly” and with more states poised to follow suit “operator revenue will continue to grow”.
Peel Hunt also predicted that the market’s revenues will reach US$5.7bn in 2021, rising to US$8.6bn in 2022 and US$11.4bn in 2023.
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Looking ahead, the broker added that there are “multiple well-financed and competent operators, and a growing number of [special purpose acquisition company]-financed companies keen to join the gold rush”, which in turn could have implications for the cost of competition in the short term and the “plausibility of the competing claims for market leadership in the longer term”.
“The US sports betting and online gaming market has attractive growth characteristics, a fact that is widely recognised. We believe the US upside potential for 888 and Entain is not accounted for in their respective share prices and we reiterate our Buy recommendation for both”, Peel Hunt said, also restating their 350p target price for 888 and 1,800p for Entain.
READ: Gaming Realms increases US presence with BetMGM integration deal
Expectations of ongoing strong growth in the US gaming market also bodes well for some of the London market’s smaller players such as AIM-listed mobile games specialist Gaming Realms PLC (LON:GMR), which on Monday inked a direct-integration agreement with sports betting and online gaming operator BetMGM to increase its presence in the US market.
Under the terms of the three-year agreement, GMR’s Slingo content will be integrated into the BetMGM Casino in Pennsylvania and Michigan during the first half of 2021, while also facilitating access to additional US markets in the future.
Shares in Entain rose 0.9% to 1,292p in mid-afternoon trading, while 888 fell 1.6% to 304.5p and Gaming Realms climbed 3% to 34.2p.