Analyst Suggests Entain Consider a Compromise with BetMGM
Entain Plc (OTC: GMVHY), witnessing a significant drop in its market value this year, has at least two potential strategies to turn things around, says Susquehanna analyst Joseph Stauff. In a recent report, Stauff assigned Entain a "positive" rating with a projected price target indicating a 17% growth potential.
He highlights two separate and appealing routes for the company. Firstly, Entain may revisit its focus on organic growth outside the US. This could be an enticing option as the company's US presence is largely due to its 50% stake in BetMGM. In contrast, outside the US, Entain relies on acquisitions, some of which have been criticized by investors, to drive top-line growth. If the company prioritizes organic expansion in uncharted territories, this would likely be well received.
Recently, in late September, Entain experienced a share price decline after announcing a less-than-satisfactory 2023 net gaming revenue forecast. This was attributed to weak online gaming activity and slow growth in Australia and Italy.
The second route involves striking a compromise with BetMGM. Such a move could help restore investor confidence and boost growth, according to Stauff. However, he doesn't elaborate on the specifics of this compromise. A possible scenario would be Entain selling its 50% interest in BetMGM to MGM Resorts International (NYSE: MGM), allowing the latter to gain complete control of the iGaming and online sportsbook divisions. MGM has expressed its desire for total ownership.
During the Global Gaming Expo in Las Vegas in October, Entain CEO Jette Nygaard-Andersen hinted that joint ventures have a limited lifespan, implying changes in BetMGM's ownership may occur in the future.
Despite its share price drop of 31.2%, Entain's market capitalization currently stands at $7.22 billion. This figure is well below the $11.06 billion offered by MGM Resorts International in January 2021 for an Entain acquisition and significantly less than DraftKings' (NASDAQ: DKNG) subsequent offer of over $20 billion. With enticing prospects and shares at a low point, more potential buyers may emerge.
However, Nygaard-Andersen has neither confirmed nor hinted at any desire to sell the company, and its acquisition spree in the past suggests it might be in a buying rather than selling mindset.
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Source: www.casino.org
