Barclays upgrades Entain, says BetMGM JV undervalued

Barclays upgraded its stance on Ladbrokes owner Entain to ‘overweight’ from ‘equalweight’ on Thursday, lifting the price target to 1,600p from 1,500p as it said the company’s joint venture with US casino operator MGM Resorts, BetMGM, is undervalued.

The bank said that having performed detailed analysis of the US sports betting and i-gaming market, it considers BetMGM to be 2materially undervalued".

"We think BetMGM will be a top four player in the US market long term (circa 17% market share), and we value it at £5 per Entain share versus £1.70 implied at today’s price," it said.

"While the MGM bid has dissolved, we expect speculation to return and a bid premium should underpin the shares."

Barclays said that while UK regulation is a concern, US upside will trump UK regulatory risk.

"Entain is our preferred pick in the gambling sector," it said.

In the same note on the European gambling sector, the bank cut its price target on ‘overweight’ rated Flutter Entertainment to 150p from 160p to reflect a slightly lower US valuation.

Barclays said it considers Flutter to be an excellent long-term play on online gambling growth, the nascent and attractive US market and market consolidation. It said Flutter’s US business should continue to drive upside to the share price but offers lower immediate upside than BetMGM offers to Entain.