Entain Receives Double Downgrade from Goldman Sachs, Analysts Make Dire Predictions
On Monday, Goldman Sachs made a bold move by downgrading its rating on Entain (OTC: GMVHF) from “buy” to “sell.” This comes after the bank had encouraged investors to purchase the gaming stock previously. In a drastic turn of events, Goldman also reduced the price target for Entain’s stock by 43.4%, explaining that the company’s online business has been lackluster, which has affected its net gaming revenue forecast for 2023.
Goldman Sachs attributed the downgrade to several factors, including increased competition in the gaming industry, better luck for bettors in the third quarter, and regulatory issues. Additionally, Entain recently agreed to pay a hefty settlement to the UK’s HM Revenue & Customs office to resolve bribery allegations related to its former operations in Turkey. The bank also expects Entain’s pro-forma online growth to remain negative in the near future.
Analyst Ben Andrews from Goldman Sachs also slashed his 2024 and 2025 earnings per share (EPS) forecasts for Entain by approximately 30%. BetMGM, a joint venture owned by Entain and MGM Resorts International, is contributing to the company’s underperformance. Despite expectations that BetMGM would be profitable in 2024 and that profits would be returned to Entain and MGM, Andrews now believes that any profits generated by BetMGM will be reinvested back into the business.
The downgrade could be an opportunity for activist investors to intervene. It was recently revealed that two New York-based hedge funds, Dendur Capital and Sached Heam Capital, have taken substantial stakes in Entain and are pressuring the board to appoint Ricky Sandler, the founder of Eminence Capital, to its board. They are also calling for a sale of the company, a move that Goldman Sachs acknowledges as a potential “upside risk” for Entain’s stock.
Entain is facing many challenges, and the gaming industry continues to be highly competitive. The decision by Goldman to downgrade the stock and the emergence of activist investors could signal a future shake-up for the company.