Berenberg cuts 888 price target, reiterates ‘buy’ rating

The bank said 888’s half-year results were in line with the company’s prior guidance. The full-year revenue guidance, however, was soft compared to Berenberg’s expectations and as a result, it brought down its estimates.

Berenberg noted that 888 expects revenue in second half to be in line with revenue in H1. This disappointed the market given obvious H2 tailwinds such as the re-entry into the Netherlands, the upcoming World Cup, and the US, it said.

"We bring our revenues down by 4-5% in FY22 and ahead and our EBITDA estimate comes down by 6% in FY22 and 9% in FY23. Under our new numbers we would not expect 888 to pay the contingent consideration for the William Hill deal freeing up further cash."

Berenberg added: "Looking ahead, the equity story is now all about the deleveraging and the path to 3x leverage. With pro-forma leverage of 5.6x at the half year, and an expensive interest burden, we are cognisant of risks but feel at the current valuation (6x our FY23 EBITDA estimate) the risk-reward is favourable."