Analyst Urges Entain to Consider BetMGM Compromise

Entain Plc, whose market value has fallen significantly this year, has two options at the very least to change directions.

Analyst Recommends Entain To Evaluate BetMGM Compromise for Optimal Growth

Entain Plc (OTC: GMVHY), whose market value has fallen significantly this year, has two options at the very least to change directions.

Susquehanna analyst Joseph Stauff, who began covering the Ladbrokes owner today with a “positive” rating and a price target implying a 17% increase from current levels, has that opinion. A renewed focus on organic growth outside of the US was mentioned by Stauff as one of the two independent and attractive paths for the stock, so that’s something to think about.

Entain owns 50% of BetMGM, which gives it exposure to the US market. Outside the US, the operator has supported top-line growth with acquisitions, including some that investors have criticized.

Although the operator of Coral has indicated that it intends to continue being acquisitive, investors may be pleased to see a renewed focus on organic growth and acquiring market share outside of the US without the need for deals.

Due to softness in online gaming, Entain issued a dismal 2023 net gaming revenue (NGR) forecast, which caused the company’s shares to plunge in late September. It also mentioned Italy’s and Australia’s slack growth.

Entain Considers BetMGM Compromise for Future Growth

Another way that Entain might be able to boost growth and win back investor confidence is by reaching a compromise with BetMGM.

Stauff pointed out that the possible deal would free Entain from its rigid operational framework, which he thinks is urgently needed to prevent a long-term loss of market share.

The Susquehanna analyst did not specify the specifics of the compromise. One possibility would be for Entain to just sell MGM Resorts International (NYSE: MGM) its half of BetMGM. The seller in such a deal would probably make a tidy profit, and MGM has stated that it wants to own all of the online sportsbook and iGaming companies.

When Entain CEO Jette Nygaard-Andersen warned attendees at last month’s Global Gaming Expo (G2E) in Las Vegas that joint ventures don’t last forever, she was hinting that BetMGM’s ownership would eventually look significantly different from what it does now.

Entain’s Declining Market Cap Fuels Takeover Speculation

Entain’s market capitalization has plummeted to $7.22 billion as a result of its shares declining 31.20% year to date. That represents a small portion of the more than $20 billion that DraftKings (NASDAQ: DKNG) offered later that year and far less than the $11.06 billion MGM offered in January 2021 to acquire the business.

Analysts haven’t refrained from speculating about Entain as a possible acquisition target over the nearly three years that have passed. With the previously mentioned market capitalization of $7.22 billion, Entain is approachable to a large number of potential suitors, so those rumors could get more serious.

Nygaard-Andersen hasn’t indicated her interest in selling the business, though, and Entain appears to be more of a buyer than a seller in light of the recent acquisition spree.