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The FTSE 100 rebounded strongly last week and one out-of-favour UK share led the charge. Entain (LSE: ENT) roared back into life, beating all comers to jump more than 14% in just five trading days.
Despite the bounce, the stock has still fallen by around 14% over 12 months and now sits at a five-year low. So is it an unmissable bargain?
I’ve written about the international sports betting specialist before, not always favourably. It’s had a tough run: botched acquisitions, a bribery scandal in Turkey that cost £585m to resolve, and underwhelming early returns from its much-hyped US joint venture, BetMGM. After an acquisition spree, the firm’s debt pile hit £3.3bn.
Momentum returns with a strong Q1
So what’s changed? The group returned to growth in 2024 and it followed this with an upbeat Q1 trading update on Tuesday (29 April). Group net gaming revenue (NGR) rose 9%, or 11% in constant currency, thanks to strong UK and US online betting volumes and some bookmaker-friendly sports results.
UK & Ireland online revenue climbed 23%, while Brazil delivered 31% growth. Even BetMGM, previously a cash burner, is on track to be EBITDA-positive for 2025 after a 34% revenue jump in Q1.
CEO Stella David said the company is “driving ahead at pace”, and on the evidence of the numbers, that looks fair.
Entain now expects steady growth in online revenues this year and remains confident of generating more than £500m in annual cash flow in the medium term.
Broker confidence builds
Analysts have been positive for a while. Of the 20 covering the stock, 12 now rate it a Strong Buy and eight say Hold. Not one recommends selling. I assume most of these recommendations were made before last week’s update.
The 18 brokers offering one-year price forecasts have produced a median target of 947.4p. If correct, that’s a potential 41% lift from today’s 670.4p. Add in the 2.77% dividend yield, and investors would be looking at a possible total return of 45%.
Of course, forecasts are only educated guesses. They’re certainly not guarantees. There’s no such thing with shares.
Entain’s not short on risk either. The company operates in a toughly regulated sector. In Australia, it’s under investigation for possible money-laundering issues after allegedly failing to report criminal account holders. That could prove costly. Any UK-listed company with US operations is exposed too as US president Donald Trump escalates trade tensions.
Valuation questions remain
Entain’s stock isn’t exactly a bargain either. It trades at 21.5 times earnings, which leaves less margin for error if investor sentiment turns again.
Investors approaching today must also weigh up the risk of short-term selling, as those who bought the dip take profits after the Q1 surge.
This isn’t a sector I admire, so I won’t be investing. But I’ve tagged this as a strong potential recovery play in what’s a controversial but cash-generative industry.
After such a sharp fall and a strong operational rebound, the Entain share price may now build some momentum but there are no guarantees. Starting from a low base, it’s got plenty of scope to recover and may be worth considering. Yet investors doing so should expect a wild ride.
