Entain, the owner of Ladbrokes and Bwin, has seen its price target reduced from 1,450p to 820p, representing a 2.9% decrease compared to the previous day’s closing price. This downgrade comes as Goldman Sachs downgraded the company, citing issues with growth, which it attributes to regulatory challenges, increased competition, and market dynamics. Goldman Sachs predicts that Entain’s online gambling operations will experience negative growth in the fourth quarter of 2023 and the first half of 2024, with a return to growth not expected until the latter half of next year. The bank also anticipates a 30% decrease in earnings per share estimates for 2024 and 2025, along with a deterioration in free cash flow.
Goldman Sachs also highlighted concerns regarding Entain’s joint venture, BetMGM, with MGM Resorts International, noting that it has lost market share in the US. In the third quarter update, Entain reported an 18% market share in US states offering online sports betting and igaming, which remained consistent with the second quarter but slightly higher than the first quarter. Additionally, Goldman Sachs pointed to Entain’s recent £585m CPS settlement related to historic activities in Turkey, which it believes will impact the company’s performance moving forward.
The changes at Entain include the resignation of former CEO Kenny Alexander, with Shay Segev taking over and Jette Nygaard-Andersen assuming the CEO role. Entain also shifted its place of management and control from the Isle of Man to the UK and rebranded in 2020. However, the company faced further challenges when the GB Gambling Commission ordered it to pay a record £17m for social responsibility failings in August 2022. Despite reporting a record H1 in 2023, Entain experienced a slowdown in online net gaming revenue growth during the third quarter. To address this, the company introduced Project Romer, aiming to achieve an online EBITDA margin of 28% by 2026 and 30% by 2028 through operational improvements and cost efficiencies, including cross cost savings of £100.0m by 2025.
