Posted: September 29, 2021, 9:12 a.m.
Last update on: September 29, 2021, 09:24h.
888 Holdings (OTC:EIHDF) is one of the sports betting stocks that has received praise from research firm Investec, which favors the recently acquired gaming name over rival Entain Plc (OTC:GMVHY).
In new coverage from 888, Investec rates the gaming company as a “buy”, with a price target of nearly $9, implying a roughly 50% upside from the Sept. 28 close. Earlier this month, 888 said it was paying $3 billion to acquire William Hill’s international assets from Caesars Entertainment (NASDAQ:CZR) – a deal that significantly expands the company’s sports betting footprint. based in Gibraltar.
Investec analyst Roberta Ciaccia said the deal provides a benefit for 888 investors. It also highlights the operator’s small but potentially lucrative position in the US sports betting market.
Earlier this year, the gaming company struck a deal with Sports Illustrated owner Authentic Brands Group (ABG) to use the name of the venerable sports betting journal. The SI Sportsbook has just launched in Colorado, and 888 said it will launch in Indiana, Iowa and New Jersey over the next few months. The company aims to have a presence in 15 states by 2024 and hopes to hold at least a 5% stake in each of those locations.
Investec prefers 888 to Entain
Coral and Ladbrokes owner Entain is at the center of major takeover talks with DraftKings (NASDAQ:DKNG) which recently launched a $22.4 billion cash and equity offer for the UK-based operator -United. But Investec’s Ciaccia argues that most of the good news is already priced into Entain’s stock.
Our coin-based fundamental fair price sum is £24/share, which is not much higher than the current level. Pending news on the DraftKings offering, we recommend existing investors hold the shares,” the analyst said.
DraftKings has until October 19 to make a formal offer on Entain. Conversely, he says 888 is attractive from a valuation perspective, as the name trades at just 10 times the expected enterprise value/earnings before interest, taxes, depreciation and amortization (EV/EBITDA) by Investec for 2022.
888’s acquisition of the non-US assets of William Hill is expected to be completed in the first half of next year. The buyer has operated as an online-only business so far, so it remains to be seen what it will do with William Hill’s more than 1,400 physical betting shops in the UK. If 888 decides to part with these assets to raise funds, it is likely to find an enthusiastic and interested group of buyers.
Flutter Another sports betting stock to consider
Flutter Entertainment (OTC:PDYPY) is another UK sports betting stock favored by Investec. Acknowledging that the shares are not cheap, Ciaccia rates the owner of the Betfair, PokerStars and Sky Bet brands, among others, as a “buy”, with a price target of $254.
The analyst claims that Flutter is the best-placed British gaming company in the United States. This status comes from the fact that Flutter owns 95% of FanDuel. FanDuel is the largest online sports betting operator in the United States, with Flutter recently claiming it has a 45% share of the world’s fastest growing sports betting market.
As Ciaccia notes, Flutter has low leverage and a strong balance sheet. The case for action could be bolstered by the operator pursuing a spin-off from FanDuel at some point in 2022.