Entain’s challenges as Goldman Sachs downgrades stock
Top tier investment bank Goldman Sachs has downgraded its rating of Entain from Buy to Sell, accompanied by a substantial reduction in the target stock price from 1,450p to 820p.
Analyst Ben Andrews cited several key factors contributing to this decision, signalling a challenging period for the gaming operator.
Analyzing the downturn
Entain has encountered a series of setbacks, notably in its online business, characterized by “disappointing” growth.
Goldman Sachs’ decision to revise its rating stems from a combination of factors that have posed challenges for Entain.
Regulatory challenges, fierce competition, market dynamics and unfavourable sports results have collectively impacted performance.
Additionally, the BetMGM joint venture in the US has not achieved the anticipated market share, leading to concerns and a potential delay in the return of capital to parent companies.
Varied investor sentiment
Despite the downgrade, Entain is actively addressing investor concerns with a renewed global strategy. The focus includes a streamlined market portfolio in high-growth markets while exiting non-core jurisdictions.
In response to these challenges, Entain has unveiled a comprehensive global strategy aimed at addressing investor concerns. The strategy involves focusing on high-growth markets, exiting non-core jurisdictions, and adopting a new approach to capital allocation. Notably, the company aims to increase its US market share to 20-25% through strategic investments following the acquisition of Angstrom Sports.
While Goldman Sachs anticipates continued underperformance in Entain shares over the next 12 months, the company’s leadership remains confident in its strategic direction. Dodge and Cox, a value investment fund, recently increased its stake in Entain, signaling varying investor sentiments. Entain’s management, including CEO Jette Nygaard-Andersen and Chairman Barry Gibson, have demonstrated confidence through personal share acquisitions, indicating a belief in the company’s resilience and potential for recovery. As Entain charts its course forward, the market watches closely to see how the gaming operator navigates these turbulent waters.
Entain aims to achieve profitable growth in core markets, with a particular push to increase its US market share. The strategy also involves organizational simplification to achieve ￡100 million in cost savings by 2025.
