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On Wednesday, BofA Securities revised its stance on Entain PLC (ENT:LN) (OTC: GMVHF), downgrading the stock from Buy to Neutral and reducing the price target to GBP7.50 from GBP8.00. The adjustment follows the unexpected announcement that Entain’s CEO Gavin Isaacs would be departing immediately.
The departure of Isaacs has prompted BofA Securities to reassess Entain’s short-term prospects, with the belief that the stock will likely remain within a certain range until a new CEO is in place. The firm’s analysts highlight the importance of leadership stability for addressing the company’s long-term challenges.
Entain’s shares experienced a decline of more than 10% after the announcement of Isaacs’s departure, leading BofA Securities to adjust their valuation of the company. The new price target reflects a higher discount rate and lower target multiples, which have been applied due to the increased uncertainty surrounding the company’s future.
Despite the recent improvements in trading within the UK at the BetMGM joint venture, the absence of a permanent CEO is expected to weigh on investor sentiment. BofA Securities has based its fair valuation on a 9x 2025 estimated EV/EBITDA ratio, which drops to 7.5x when excluding BetMGM, and a 16x P/E ratio, reducing to 9x when BetMGM is excluded.
The firm’s analysts have expressed that while the current valuation seems fair, the lowered price objective to 750p from the previous 800p is justified due to the greater uncertainty now faced by Entain.
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