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JPMorgan Cazenove upgraded Ladbrokes owner Entain on Tuesday and downgraded 888 Holdings as it took a look at the onling gaming sector.
The bank upgraded Entain to ‘overweight’ from ‘neutral’ and lifted the price target to 1,852p from 1,628p given that its non-US assets now trade at a discount to 888, and a substantial discount to those of neutral-rated Flutter Entertainment, while it still offers optionality should JPM’s US total addressable market prove conservative (TAM).
“Our US TAM of $14bn in 2025E (versus circa $3-4bn in 2020) would suggest US valuations of c£12bn for Flutter and c£3bn for Entain (50% of BetMGM), and would imply their non-US assets are trading on 14.4x and 9.6x 2021E EBITDA, respectively, vs 11.2x for 888, a digital pureplay.
“If Flutter and Entain are correct in their suggestion of a c$20bn US TAM, then we estimate that Entain would offer 36% upside and Flutter 21% – Flutter’s non-US assets would continue to trade on a small premium to 888 (ex-US losses).”
The bank downgraded 888 to ‘neutral’ from ‘overweight’ after the share price reached its target price following substantial outperformance.
