JPMorgan downgrades Entain after outperformance

The bank said online gaming benefitted from pandemic tailwinds in 2020 that will continue into the early part of this year.

"Growth will be harder to come by across the rest of 2021 given tough comps, US investment will continue to constrain profitability, while there is a regulatory headwind in Germany and regulatory uncertainty in the UK.

"Against this background and given substantial outperformance, we downgrade Entain to neutral and maintain a neutral on Flutter."

JPM noted that the UK Gambling Act of 2005 is under review to ensure there is a balance between consumer freedoms and the prevention of harm, and an equitable approach to land-based and online regulation.

"Conclusions and potential proposals for reform are due later in the year. While reforms may have negative implications for revenues and costs, it will provide visibility," it said, adding that the UK represents 35%, 33% and 40% of 888, Entain & Flutter’s revenues, respectively.

JPM maintained its overweight rating on 888, pointing to the company’s cheaper valuation, pureplay on online & optionality around sports, US and its balance sheet.

The bank lifted its price target on Entain to 1,607p from 1,220p and on 888 to 350p from 300p. The target price for Flutter was upped to 14,790p from 11,200p.