Entain Shares Plunge on Tepid iGaming Revenue Forecast

Posted on: September 25, 2023, 11:09h. 

Last updated on: September 26, 2023, 02:13h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Entain Plc (OTC: GMVHY) is among Monday’s worst-performing gaming equities after the Ladbrokes owner issued a disappointing 2023 net gaming revenue (NGR) forecast, citing softness in online gaming.

Entain CEO Jette Nygaard-Andersen in a PR photo
Entain CEO Jette Nygaard-Andersen in a PR photo. The stock slumped today after the operator issued a downbeat revenue forecast. (Image: EGR Global)

The company, which owns half of BetMGM, also told investors that regulatory headwinds persisted longer than expected in the UK, while growth in Australia and Italy is lethargic. For the third quarter, Entain expects NGR to rise on a high single-digit percentage basis but decline in the high single digits on a pro forma basis.

We now expect Group Online NGR for FY2023 to be up low double-digit percent with proforma NGR down low single digit percent. We reiterate our expectations for FY2023 EBITDA to be in the range of $1.22 billion-$1.28 billion supported by robust operational controls,” according to a statement.

FTSE-listed Entain, which also owns the BetCity, Bwin, Coral, and Crystalbet brands, is scheduled to release a full trading update on November 2.

Regulatory Headwinds

The UK Gaming Commission (UKGC) recently released new guidelines pertaining to online gaming operators. While that newfound clarity could be a long-term positive for operators, it could also be a near-term hurdle.

That, coupled with Entain earmarking $744.5 million related to a bribery scandal in Turkey that occurred under previous leadership, is acting as headwinds on the regulatory front.

On the other hand, the operator noted its now-lengthy acquisition binge, including a slew of deals in Eastern Europe, is paying off.

In the statement, Entain said recent purchases are performing well, particularly SuperSport in Croatia. Analysts believe the operator will continue looking for deals in Central and Eastern Europe. Part of the allure of Eastern Europe for deal-hungry suitors in the gaming industry is that those markets aren’t as mature as the UK, Germany, or Italy, indicating more growth potential.

In July, Entain announced the purchase of analytics provider Angstrom Sports for $266 million in cash. Though not directly mentioned in the press release, that transaction has been discussed in positive terms by Entain and MGM Resorts International (NYSE: MGM) executives as it relates to synergies with BetMGM.

Speaking of BetMGM …

BetMGM is performing admirably, potentially softening some of the blow from weakness in Entain’s operations in other markets.

BetMGM remains on track to deliver positive EBITDA in H2 and a full-year NGR performance at the top end of our expectations, and we are particularly excited about the product improvements that we are rolling out over the NFL season,” noted CEO Jette Nygaard-Andersen in the statement.

With Monday’s slide, Entain stock has wiped out nearly all its gains accrued since the start of the coronavirus pandemic, and its market capitalization now resides at $8.26 billion. That could stir renewed speculation that the company is a takeover target for any potential suitors, including MGM, which has made no secret of its desire to control BetMGM.