Entain (LSE: ENT) posted expectations-busting first-half results Tuesday (12 August), but the share price hardly budged in early trading. The anticipation had already been building, with the gambling group up over 65% in the past 12 months.
H1 net gaming revenue (NGR), including revenue from the company’s 50% stake in BetMGM, grew 7% over the same period a year ago — and up 10% at constant currency. The report says the performance was “particularly pleasing as prior year Q2 comparators included [the] Euros tournament.”
Entain reckons BetMGM has a “clear path to $500m EBITDA and beyond.” That’s after guidance on 16 June indicated at least $100m EBITDA for the 2025 full year.
Bouncing back
An overhaul of gambling legislation in 2018 laid the grounds for a surge in US business. A law known as the PASPA act had effectively banned sports betting almost nationwide. But after it was declared unconstitutional, the way was open for individual states to set the rules. The formation of BetMGM, half owned by MGM Resorts International, was a prompt outcome.
In this half, BetMGM net revenue soared 35% at constant currency. And EBITDA reached $109m, already ahead of that earlier $100m full-year guidance.
The group recorded an overall loss after tax of £117m. It seems that’s down to charges related to one-offs, but it does cloud the overall picture a bit. Adjusted earnings per share rose 154% though, and the board raised the interim dividend 5% to 9.8p per share. For the full year, Entain now expects online NGR growth of 7%, with group EBITDA in the range of £1,100m to £1,150m.
As CEO Stella David said that “Entain’s transformation journey is well under way,” does the apparently sparkling outlook make it a no-brainer buy?
Still a gamble?
A number of issues make me pause. One is forecasts still showing a loss this year. I suspect they’ll be upgraded to some extent in the light of this latest update. But it makes it harder to judge the stock’s valuation.
A forecast price-to-earnings (P/E) ratio of 49 for 2026 also holds me back. Again though, I’ll watch for improvements in that as analysts mull over the first half. But as it stands, I’m not sure I see a lot of safety margin in that valuation.
I see non-valuation risks too. I mean, it’s the gambling business. And that makes it a prime target for lawmakers around the world. There’s really only one thing I’m confident of when it comes to gambling legislation and taxation — I expect both to be constantly changing, somewhere.
Against my caution, we do see a pretty strong Buy consensus among brokers — one of the strongest for FTSE 100 stocks. And the average share price target of 1,115p is 18% ahead of where it is as I write.
What to do?
So will I buy? It’s not one for me, but that’s mainly due to my preference for safer dividend stocks. But for growth stock investors who don’t mind the risk that comes with the strategy, I rate Entain as definitely worth considering — even after the past year’s share price rise.
