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Invsting.com -- Morgan Stanley (NYSE:MS) has downgraded Lottomatica Group S.p.A. (BIT:LTMC) to “equal-weight” from “overweight,” citing a more balanced risk-reward profile following strong operational delivery and a rising share price.
The brokerage raised its price target to €27 from €24.50, implying 13% upside from the July 30 closing price of €24.62, but said this is no longer sufficient to maintain a bullish stance.
The analysts described Lottomatica’s performance in the first half of 2025 as one of the most well-executed stories in European online gambling.
However, they now see the company’s strategy and earnings trajectory as better understood and more fully priced in by the market.
“We continue to believe in Lottomatica’s differentiated market position and see opportunity for further share gains, particularly in the next 6-12 months (online licensing event; Flutter/Snaitech transition friction),” said analysts at Morgan Stanley.
Lottomatica operates exclusively in Italy, where it is the market leader. It has reshaped its business significantly, growing online EBITDA contribution from 20% in 2019 to 57% by Q2 2024.
While the company is expected to benefit from an upcoming online licensing process in 2025, Morgan Stanley said this event is already widely anticipated and no longer offers meaningful surprise potential.
The brokerage also flagged single-country exposure and long-term tax risks as structural concerns.
Forecast revisions were modest. EBITDA for FY26 was raised 1% to €954 million, and for FY27 to €1.039 billion.
EPS for FY26 remains at €1.94, and FY27 at €2.16. Dividend per share forecasts for FY26 and FY27 are unchanged at €0.58 and €0.65, respectively.
EBITDA margins are projected to improve from 37.3% in FY25 to 39.2% in FY27. Net income is forecast to reach €498 million in FY27, up from €384 million in FY25.
Despite the downgrade, Morgan Stanley acknowledged the company’s strong fundamentals, high free cash flow yield, and continued online market share gains.
The analysts noted that mergers and acquisitions will likely be a key driver going forward. While one final domestic deal remains possible, international expansion is viewed as a necessary next step, albeit one that introduces new execution and integration risks.
Among its European gambling coverage, Morgan Stanley continues to rate Flutter Entertainment and Entain as “overweight,” while keeping Lottomatica, Evolution, FDJ UNITED, and Playtech (LON:PTEC) at “equal-weight.”