Entain and 888 worth a buy after recent falls, says JP Morgan

JP Morgan has reiterated its 'overweight' ratings on UK-listed gambling stocks Entain and 888, saying that gaming remains its preferred sub-sector within the leisure industry right now.

Despite recent profit warnings from both companies, shares have de-rated by around 20% since June, analyst Estelle Weingrod said in a research note on Thursday. As such, the sector trades at just 8.5 times EBITDA estimates for 2024 on average.

Weingrod said it's attracted to the gaming sector due to its relatively defensive nature during downturns, as well as improved visibility on the back of a "more recreational customer base and the ongoing step-up in safer gambling-related investments".

Further legalisation in certain markets and improving online adoption adds to growth prospects, as well as opportunities for expansion in the US.

JP Morgan has a 1,800p target price for Entain, suggesting significant upside from the current 960p level, while 888 has a target of 150p, compared with Thursday's price of around 90p.

The other UK-listed gaming stock in the bank's coverage, Flutter Entertainment, is rated 'neutral' with a target price of 17,100p, still suggesting some way to go from the current 13,775p level.