Digitalization Will Expand iGaming And Online Betting

Key Takeaways

• Data-driven marketing, tech innovation, and omnichannel partnerships are boosting customer engagement, retention, and margins while strengthening Entain's competitive advantage.
  
• Regulatory shifts and broader digital adoption in key markets are increasing Entain's long-term growth opportunities and revenue potential through expanded market access.
  
• Regulatory pressure, market saturation, intense competition, and rising costs may limit profit growth and challenge Entain's ability to expand or sustain market share.

Catalysts

Operates as a sports-betting and gaming company in the United Kingdom, Ireland, Italy, rest of Europe, Australia, New Zealand, and internationally.

• Increasing user engagement and retention, along with growth in player acquisition for both iGaming and online sports betting, is being driven by more efficient, data-driven marketing and product innovation (e.g., enhanced app speed, live dealer content, cross-selling tools); this is supporting higher top-line revenue and improving net margins.
  
• The broader societal trend of online entertainment adoption-fuelled by digitalization and normalization of online betting-remains a tailwind, as reflected in 38% growth in monthly actives and players engaging 34% more days per month, which is likely to boost future customer lifetime value and long-term revenue.
  
• The ongoing liberalization and regulation of sports betting and iGaming in North America, with new states such as Missouri and Alberta expected to launch, creates a meaningful option value for Entain as its existing OSB player base can be efficiently migrated to iGaming, expanding the addressable market and long-term revenue potential.
  
• Long-term investment in proprietary technology platforms (AI-driven player management, trading tools, and personalization) is enabling more profitable customer acquisition, better player economics, and operational leverage; this is expected to drive EBITDA growth and margin expansion over time.
  
• The deepening omnichannel partnership with MGM Resorts, including exclusive content and a strong cross-state loyalty ecosystem, is driving higher-quality customer acquisition and engagement, thus reinforcing Entain's competitive moat and supporting earnings and cash generation that could soon allow for capital returns to shareholders.

Entain Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Entain's revenue will grow by 5.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -10.6% today to 10.0% in 3 years time.
• Analysts expect earnings to reach £605.7 million (and earnings per share of £0.56) by about September 2028, up from £-549.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.1x on those 2028 earnings, up from -9.9x today. This future PE is lower than the current PE for the GB Hospitality industry at 16.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.17%, as per the Simply Wall St company report.

Entain Future Earnings Per Share Growth

Risks

• Increasing regulatory scrutiny and recent rises in gaming tax rates (e.g., New Jersey and Illinois) present persistent cost headwinds and operational complexity, which may compress net margins and limit bottom-line growth-even as revenue rises.
  
• The future of new state iGaming legalization remains uncertain, and while long-term liberalization is anticipated, slow or stalled legislative momentum could structurally cap BetMGM's (and thus Entain's) addressable market and revenue growth.
  
• Adjacent sector competition (e.g., sweeps and prediction markets), the rise of unregulated alternatives, and potential disruptive new entrants (such as technology or crypto firms with larger liquidity pools) may threaten market share and put pressure on customer acquisition, retention, and pricing power, impacting revenue and profitability.
  
• Reliance on high-quality player acquisition and continually increasing marketing efficiency faces diminishing returns as mature markets reach saturation; future growth will increasingly require costly expansion or innovation, raising customer acquisition costs and pressuring long-term earnings.
  
• Rising capital intensity for state launches and compliance, coupled with volatile promotional costs and normalization of EBITDA flow-through rates post-marketing recalibration, may lead to less impressive future margin expansion and lower free cash flow available for shareholder returns.

Valuation

• The analysts have a consensus price target of £11.387 for Entain based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £14.0, and the most bearish reporting a price target of just £9.45.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £6.0 billion, earnings will come to £605.7 million, and it would be trading on a PE ratio of 16.1x, assuming you use a discount rate of 10.2%.
• Given the current share price of £8.52, the analyst price target of £11.39 is 25.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.