“For the stock to work we think it needs online to return to market growth rates or better and US share to stabilise (and grow),” Barclays said, adding that “neither are a given.”
In Q3 2023, Entain’s online revenue climbed 9%, but fell by 6% on a proforma basis.
This was in-line with the group’s 25 September trading update, in which it highlighted a Q3 slowdown.
Entain also reduced its online EBITDA margin expectations for 2023 by 1% to 25%.
Barclays stated that Entain may face challenges in maintaining and reclaiming market share without increased promotional spending and in the face of strong competition.The bank said there is little free cash flow and pointed out that high leverage restricts M&A.
Entain shares are down nearly 38% in the trailing 12 months.
Looking ahead, Barclays sees the imminent appointment of a new CEO as a potential catalyst for change.
Former CEO Jette Nygaard-Andersen left her position in December in the face of mounting pressure from investors.
The bank suggested that a new CEO could potentially address concerns surrounding the company’s balance sheet.
“The stock appears cheap but risk-reward is fairly balanced here so we downgrade to equal weight,” Barclay’s said.
In November 2023, Goldman Sachs also downgraded its rating of Entain from Buy to Sell and slashed its target price for the stock from 1,450p to 820p.