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On Friday, BofA Securities analyst upgraded Entain PLC (ENT:LN) (OTC: GMVHF) stock, a prominent player in the sports betting and gaming industry, from Neutral to Buy. The new price target set for the company is £8.00, a decrease from the previous £8.70. The adjustment comes after a significant decline in Entain's share price, which dropped more than 20% over the past month due to a combination of factors.
The downgrade in Entain's share price reflects concerns stemming from a substantial fine in Australia, less favorable sports betting results in the United States during the fourth quarter of 2024, and a general devaluation of UK equities. However, BofA Securities sees several reasons for the upgrade to Buy status.
These include a notable improvement in the company's US market share during the last quarter of 2024, the recent appointment of an experienced new CEO, and an attractive valuation, with shares trading at just 7 times the estimated core P/E for 2025.
BofA Securities has also increased its 2025 earnings per share (EPS) estimate for Entain by 23%. This optimistic revision is based on two main factors: a 5% increase in projected revenue for BetMGM and an improved online margin within the UK market. Despite the positive outlook on earnings, the price objective has been lowered to 800 pence from 870 pence.
This change reflects the recent shifts in UK interest rates and the lower visibility surrounding potential increases in gaming taxes. Nonetheless, BofA Securities believes that there is still a 30% upside potential for Entain shares.
The analyst highlighted the company's resilience and potential for growth despite the recent challenges. With the strategic changes and market position improvements, Entain is poised for a recovery according to BofA Securities' analysis. The firm's outlook is set against the backdrop of a dynamic and evolving betting and gaming landscape.
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