CEO Steven Salz has underscored the pivotal role of product innovation and brand maturity in Rivalry’s pursuit of profitability.

Topline numbers

Esports betting specialist Rivalry witnessed a substantial 60% year-over-year increase in revenue to C$8.5m in Q2 2023, marking the highest ever for any second quarter in its history.

Additionally, Rivalry’s betting handle for Q2 2023 reached C$112.2m, reflecting a noteworthy 192% year-over-year increase.

In H1 2023, revenue reached C$20.5m, a year-over-year increase of 103%. Betting handle hit C$232m, up 196% on H1 2022.

News nugget

Rivalry has set its sights on achieving profitability by the first half of 2024.

The company has made significant strides in the second quarter of 2023, with a remarkable 86% increase in gross profit (C$3.8m) compared to the same period last year.

Despite this progress, a one-percent worsening in net loss (C$6.3m) has highlighted the unique challenges the company faces in its pursuit of profitability.

The increased net loss was attributed to a selection of low-probability esports and sports outcomes, as well as distinctive betting behaviours exhibited by Gen Z users. These factors led to heightened margin volatility, thus negatively impacting revenue.

Additionally, the incorporation of various one-time expenses further contributed to the expansion of the company’s net loss.

CEO Steven Salz acknowledged these challenges and revealed the company’s strategies to address them. To tackle this, Rivalry plans to diversify its marketing efforts through media channels and enhance its product suite.

Salz maintained optimism about Rivalry’s profitability target, citing ongoing product innovation and brand maturity as crucial factors.

In Q2 2023, the company attracted 44% more new customers year-over-year while cutting customer acquisition costs by 41%.

Moreover, the expansion of the offering beyond esports and traditional sports markets to casino added C$57.5m in betting handle during the quarter, partially offsetting esports seasonality.

Best quote

“We talk about it the same way that retail companies prepare for the Christmas season, where they experience a significant increase in activity. I believe every business, depending on seasonality, has its equivalent of that. For us, it’s about ensuring we provide real-time world-class customer support and that we’re properly and effectively staffed, all while making sure we’re facilitating smooth and seamless financial transactions.”
Rivalry co-founder and CEO Steven Salz on the company’s preparations for esports tournaments

Best question

During the earnings call, CEO Salz was asked to offer further insights into the profitability guidance and to expand upon the strategies and mechanisms that have been implemented to attain profitability.

In his reply, Salz highlighted the introduction of new products and releases, specifically mentioning the success of the recent casino addition that organically boosted the company’s performance, with “literally $0 in marketing spend”.

Rivalry expects to see a similar uplift from new product releases, he added.

Moreover, he said that with increased volume, the company can attain more consistent margins over time due to the “law of large numbers”.

He also mentioned efforts to strategically enhance the margin mix, including the introduction of higher-margin products like same game combos, which contribute to improved profitability.

Lastly, Salz also touched on operational optimisation, which allows for modest increases in selected margins without compromising the company’s reputation for trustworthiness.

“It’s a combination of all those things that we feel will get us there,” he concluded.

Current trading and outlook

Rivalry continued to exhibit strong performance as it entered Q3 2023 as the company generated betting handle of $46.6m for the month of July 2023.

This achievement not only marks a significant milestone but also reflects a substantial 99% year-over-year surge compared to the same period in the preceding year.

Looking ahead to the upcoming year, Rivalry plans to reach profitability during the first six months.

These projections are rooted in the expectation of consistent revenue growth across successive quarters, a focus on prudent cost management and the sustained introduction of innovative products.

Esports betting specialist Rivalry experienced a 60% surge in revenue during Q2 2023 and expects to achieve profitability in the first half of 2024.

The Toronto-based company generated revenue of C$8.5m, setting a new record for any second quarter in its history.

Moreover, in a substantial year-over-year boost, Rivalry’s betting handle for Q2 2023 came in at C$112.2m, up 192% annually.

In addition, the company managed to reduce marketing spend by 6% year-over-year, while gross profit saw an 86% year-on-year increase to C$3.8m.

Margin volatility

However, it wasn’t all positive news for Rivalry. The company reported a marginal increase in net loss, by 1% to C$6.3m.  

Rivalry CEO and co-founder Steven Salz attributed this to several one-time expenses and a unique behavioural betting pattern seen in their primarily Gen Z and Millennial customer base, which resulted in higher margin volatility.

“That said, challenges like this come with our position at the bleeding edge of a demographic shift in online gambling, and it has also allowed Rivalry to learn more than other operators about what is needed to succeed among this coveted cohort,” he added.

Despite the challenges, Salz expressed optimism about the company’s position, stating: “Increased marketing sophistication and enhancements to our core product have led to operational improvements, increased player wallet share, and a material year-over-year reduction in the cost of customer acquisition.

“The growing strength in these underlying fundamentals continues to validate Rivalry’s global brand leadership in esports betting and online gambling.”

Notably, the company’s casino division contributed towards diversifying its revenue streams and mitigating the esports seasonality slowdown traditionally experienced in Q2.

The division added C$57.5m in handle during the quarter.

Confident outlook

“At consistent industry average margins Rivalry would have been profitable in Q1 and Q2 this year against the betting handle wegenerated,” Salz explained.

He added that through continual adjustments, combined with the inherent advantages of scaling handle through growth that contribute to margin, volatility will decrease.

This, in turn, will have a positive impact on “bottom-line results, and propelling us to profitability in the first half of next year”.

Rivalry recently launched a mobile app in Ontario and a same-game parlay product for esports.

“This feature, and others arriving in the third quarter, strengthens our position at the edge of technical and product innovation, and more broadly, our ability to continue delivering a market-leading betting experience catered to young Millennial and Gen Z consumers,” said Salz.

“We have barely scratched the surface of the feature set on our deep product roadmap, which we are confident will enable us to win this global generational opportunity in betting,” he concluded.

After declaring its first quarter of EBITDA profitability in Q2 2023, DraftKings management today (4 August) helped elucidate exactly how the business managed to reverse significant losses in recent years.

Topline numbers

DraftKings generated revenue of $875m during Q2, up 87.8% from $466m in the prior-year period.

That increase helped the business reach EBITDA profitability for the first time, as it posted adjusted EBITDA of $73m for the quarter, compared to an adjusted EBITDA loss of $118.1m in Q2 2022.

A more detailed breakdown of the Q2 financial results can be found here.

How did they do it?

Naturally, analysts on today’s earnings call were keen to understand the developments driving DraftKings’ change in fortunes.

The operator’s management was not shy about explaining how the turnaround came about, citing myriad factors all contributing to DraftKings’ Q2 success.

Fundamentally, CEO Jason Robins explained, the business has been laser focused on continuing to improve its product offering, with great attention paid to the development of its own same-game parlay (SGP) capabilities and the differentiation of its live betting content.

The business now has live SGPs built in-house for most major US sports including NFL, NBA, MLB, and college football and basketball.

The company’s “persistent focus on product differentiation is already apparent in share trends,” said Robins, suggesting DraftKings achieved OSB handle share of 35% and OSB GGR share of 32% in the quarter in states where it is currently live.

“We also maintained the number one iGaming GGR position and set an all time record for iGaming GGR share at 27%,” Robins concluded.

Financial contributors

DraftKings’ CFO Jason Park, meanwhile, was able to provide a more granular view on the specific financial benefits of several converging factors during the quarter.

He also set out how the strong Q2 performance had contributed to an upswing in the company’s expectations for the full-year 2023.

“Customer retention and engagement outperformed expectations as we successfully transitioned customers from the NBA season into MLB,” Park said, adding that “we have seen significantly better-than-expected engagement on MLB due to our enhanced product.

“Structural hold is also above expectations, at approximately 9% for the quarter, while promotional intensity improved, together supporting a more than 550 basis point year-on-year improvement in our adjusted gross margin rate to 47%,” he added.

In addition to those improvements, DraftKings’ fixed expenses were better than expected as the company focused on managing its costs and “exerted discipline on our compensation expense.”

Park also explained how the company’s more mature state markets had contributed outsized results to the business.

In states where DraftKings went live between 2018 and 2021, handle grew by more than 35% year-on-year, while revenue grew even faster at more than 70%, he explained.

Meanwhile, the adjusted gross margin rate in those states increased by more than 800 basis points, and the number of total unique customers increased some 25%, all while DraftKings was able to reduce its external marketing spend by more than 10% year-on-year.

After increasing previously issued revenue guidance by $315m, and adjusted EBITDA expectations by $110m, Park also broke down what specifically drove the improved forecast.

Customer retention, acquisition and engagement “are exceeding expectations,” he said, and therefore account for $225m of the expected revenue improvement and $100m of the adjusted EBITDA improvement.

Expected improvements to DraftKings’ sportsbook hold percentage, supported by the introduction of improved SGP and live betting capabilities, accounted for a further $40m in expected revenue improvement and $30m in EBITDA improvement.

Favourable sport outcomes in Q2 contributed a further $30m to the expected revenue improvement and $20m to the EBITDA improvement.

Those improvements are expected to be offset somewhat by an earlier-than-expected launch of sports betting in Kentucky (expected to deliver an additional $20m in revenue but a $30m reduction in EBITDA), and an increase in Ohio’s sports betting tax rate, expected to result in $10m in additional costs.

Best quote

CEO Jason Robins explains how DraftKings seeks to continually improve its product:

“It’s a very complicated product, and there’s a lot of things that can create customer friction if you’re not careful. Really a big focus for us over the last year and a half has been removing customer friction throughout the journeys.”

Best question

The best question on today’s earnings call came from David Katz of Jeffries, who asked management whether further M&A could be on the cards in order to help DraftKings keep up its recent momentum.

CEO Robins’ response was somewhat cagey, as he reiterated that: “It’s about to be the most important time of year seasonally for us. We have fall coming up with the NFL and college football calendar, NBA – lots of things happening this fall. 

“So this is the most important time of year, this is when we acquire the most customers, when we have the biggest opportunity to gain more market share, and it’s where we generate the most revenue and the most EBITDA.”

As a result, he said, DraftKings’ teams remain “laser focused on executing,” and the business has “a lot of exciting stuff coming for NFL and college football and basketball and hockey and everything else.”

Finally providing a somewhat direct response to Katz’s question, he concluded: “Listen, there’s always talk of things happening in the background, and we have small teams that make sure they’re aware of what’s going on. 

“But as a company, we’re very, very focused on executing and winning in the US.”

Current trading and outlook

Revenue for full-year 2023 is now expected to fall between $3.46bn and $3.54bn, representing an increase of $315m at the midpoint compared to previously issued guidance.

Full-year adjusted EBITDA is expected to fall between a $190m loss and a $220m loss, down from a previously stated expected EBITDA loss between $290m and $340m.

Elsewhere, DraftKings’ adjusted gross margin percentage is now expected to fall between 43% and 45%, rather than the previously stated range of 42-45%.

The business ended Q2 with $1.1bn in cash and now expects to end 2023 with more than $1bn on its balance sheet.

DraftKings has experienced a surge in market sentiment, propelling its stock to a 52-week high.

Yesterday (10 July), DraftKings closed at $28.86, representing an 8.3% increase from the previous closing price of $26.65.

The upward momentum has been sustained over the past month, with DraftKings gaining 13.4% during this period.

While the current price remains below its all-time peak from almost two years ago, investors are optimistic about DraftKings’ future prospects, driven by the expectation of achieving profitability on an adjusted EBITDA basis.

DraftKings is not expected to report earnings until early August, but the positive sentiment surrounding DraftKings is shared by analysts, with a consensus of 27 analysts indicating a strong buy recommendation.

Analysts offering 12-month price targets projected an average target of $28.85, with a high estimate of $39 and a low estimate of $17.

Notably, Oppenheimer analyst Jed Kelly recently raised the price target for DraftKings from $30 to $36, maintaining an outperform rating.

The analyst highlighted that DraftKings’ handle share in New York recently surpassed that of FanDuel for the first time since online sports betting launched in January 2022.

DraftKings recorded a handle of $131m during the first full week of June, outpacing FanDuel by 9%.

BTIG Research also named DraftKings as a top pick for the second half of the year, citing favourable fundamentals such as product improvements, an increasing parlay mix and improved efficiency.

Profitability potential

In May, DraftKings CEO Jason Robins expressed confidence in the company’s outlook for the remainder of 2023, assuring shareholders of its potential for profitability on an adjusted EBITDA basis in the near term.

In Q1 2023, DraftKings exceeded analyst estimates by reporting revenue of $770m, an 84% increase compared to the previous year.

The company attributed this growth to efficient customer acquisition, higher hold percentages driven by product innovation, and reduced promotional spending in mature US states.

Based on its strong performance, DraftKings raised its midpoint full-year 2023 revenue guidance to $3.19bn and adjusted EBITDA guidance to a loss of $315m, reflecting increased efficiency.

Genius Sports exceeded previously issued earnings guidance in Q1 2023, and has adjusted its full-year revenue and adjusted EBITDA expectations accordingly.

Topline numbers

Group revenue came in at $97.2m in Q1, up 13.2% year-on-year, or 19.1% on a constant currency basis.

That saw the business exceed its previously stated quarterly revenue guidance of $92m by some 5.4%.

Adjusted EBITDA for the quarter totalled $8m, well ahead of previously stated guidance of $3m and a significant improvement on the $2.9m adjusted EBITDA loss reported in Q1 2022.

Still, the business posted a net loss of $25.2m for the quarter, down some 37.4% compared to the $40.2m net loss registered in Q1 2022.

News nugget

Genius Sports CEO Mark Locke (pictured) said: “2023 is the year in which Genius expects to significantly accelerate group adjusted EBITDA profitability and rapidly expand margins. 

“Our first quarter results demonstrate the operating leverage of our business model, built to benefit from positive industry trends and support sustainable, profitable growth.”

Although the business has outperformed expectations and recorded significant growth across the group, its betting technology, content and services division was the only one of its three business segments to grow year-on-year.

Growth in that segment was driven by new customer acquisitions and growth among existing customers, as a result of price increases on contract renewals and renegotiations, Genius said.

In addition, growth in the betting technology segment was driven by a higher volume of total bets placed and increased in-play betting driving higher operator margins.

Those factors have helped to generate increased revenue for Genius while generating minimal or no additional costs.

Negative growth in the media technology, content and services segment was caused by lower advertising spend by its clients relative to the prior-year comparative period.

The sports technology and services segment suffered, meanwhile, due to lower revenues from non-cash consideration contracts.

Still, the business achieved significant highlights in Q1 including expanding its partnership with the NBA, launching a suite of NFL free-to-play interactive games to help grow the league’s international fanbase, and introducing its Genius Marketing Suite fan engagement engine.

Analysts at strategic advisory firm Regulus Partners suggested that Genius is “finally” leveraging the value of the exclusive rights it holds in several professional sports leagues, putting the business “within touching distance of real profitability.”

Now, it added, Genius should seek to capitalise further on those rights by “showing to stakeholders how they are adding value to sports rights over and above” the core benefits of providing official data.

It suggested Genius should do this by further developing the ways in which sports data can be used by operators, which “could unlock the secret to making mass market betting customers become more engaged in a sustainable manner and growing the segment.”

Best quote

“One of the fundamentals about Genius is that given the number of sports, our long tail and the marquee products we have, if you run a legalised sportsbook globally, you have to work with Genius.”

– Genius Sports CFO Nick Taylor

Best question

Senior equity analyst for JMP Securities, Jordan Bender, asked management on today’s earnings call to clarify whether Genius’ US operations had been EBITDA positive during the quarter.

In response, CFO Nick Taylor explained that it’s difficult for Genius to provide geographical breakdowns of its revenue and earnings because many of its rights contracts are agreed on a multi-national basis.

With that said, Taylor added that the quarter was not EBITDA positive in the US, but that “the losses that we’ve found in the US have certainly got less and will continue to reduce through 2023″.

“I said at the year-end that we’ll be looking at around a single-digit EBITDA loss in the US for 2023, which is considerably better than it was in 2022, and I expect that to continue to progress to a breakeven and positive position for 2024,” he concluded.

Current trading and outlook

Genius Sports has increased its revenue guidance for the full year 2023, from $391m to $400m.

Group adjusted EBITDA for the year is now expected to come in at $49m, up from previously issued guidance of $41m, on an EBITDA margin of 12%, revised upwards from 10%.

Green Jade Group has ceased operations after the game developer led by industry veteran Jesper Kärrbrink was unable to achieve the necessary level of profitability.

Benedict McDonagh, co-founder of the company, made the announcement in a LinkedIn post on 8 April.

He said the company never found its hit and did not “luck out” with a perfect recipe of timing, math, features, and front-end.

The company, founded as Green Jade Games in 2017 by former Mr Green CEO Jesper Kärrbrink and McDonagh, merged with Las Vegas-headquartered iGaming supplier GameCo in October 2022.

McDonagh shared a touching account of the inception of Green Jade Group, sparked by Kärrbrink’s desire to “change the face of gambling content”.

“New game ideas came from everywhere and we killed more concepts than we incubated,” McDonagh recounted.

“With no one to copy, it was left to us to learn what could work, what absolutely doesn’t work, and what gives us hope for the future, and being on the journey through this adventure I can tell you was an epic experience,” he said.

Lack of top earners

The company grew to include over 20 nationalities from five continents and became known for its real-money arcade games.

However, McDonagh revealed that the company “didn’t iterate to a base of good earners quickly enough”.

While he expressed his disappointment with the closure of the company, he also celebrated the achievements of Green Jade Group.

“We built a world-class platform, with features no one else has replicated, integrations with amazing aggregation partners, gained licences in the UK, Greece, and Malta, and boasted 100% uptime I think, practically forever,” McDonagh said in the post.

Benedict McDonagh: “The stresses of the job, which more than once knocked me off my feet, were never people related, in fact, the reason I was able to stay so positive and hopeful that we would ‘turn it around’ and make the money needed to continue and win was because of those with whom I worked elbow to elbow.”

McDonagh also acknowledged the talented individuals who joined Green Jade both home and abroad.

“People make the culture, and there wasn’t a day in five years where I didn’t look forward to going into the office,” he said.

“The stresses of the job, which more than once knocked me off my feet, were never people related, in fact, the reason I was able to stay so positive and hopeful that we would ‘turn it around’ and make the money needed to continue and win was because of those with whom I worked elbow to elbow,” he added.

He concluded his post by pledging to continue to champion those who want to do things differently and to applaud everyone who succeeds, now that he knows just how difficult it is to succeed.

Increasingly competitive

McDonagh’s post received numerous comments, including one from Tim Heath, founder of Yolo Group and an investor in Green Jade Games.

Yolo Investments first purchased equity in Green Jade Games in 2019 and increased its position in 2021.

Heath said: “Building a successful and profitable game supplier company is incredibly difficult these days, and I can say wholeheartedly you guys gave 110% every day.

“You guys tried to do something different and were not scared of being different, hence you can hold your head very high,” he added.

The game development market has become increasingly competitive in recent years, with several new studio launches.

However, at the same time, studios are struggling with the growing need for game certifications in different markets, which has become an essential but expensive part of their business.

Kindred Group’s Q4 2022 financial performance has fallen short of expectations. Management has pledged to take immediate action.

Topline numbers

Kindred Group has reported a 25% rise in Q4 2022 revenue to £305.5m, primarily driven by the operator’s return to the Netherlands. Q4 underlying EBITDA climbed by 42% to £39.1m.

The Netherlands continued to perform strongly with daily average gross winnings revenue of £0.6m in Q4. It was the exception to the rule, however, as Kindred’s overall performance “fell significantly short of management expectations”.

This has led to immediate actions being taken to improve profitability. More on that below.

For full-year 2022, total revenue declined by 15% to £1.07bn as underlying EBITDA fell by 61% to £129.2m, down from £332.1m in 2021.

In Q4, active customer numbers climbed 25% to 1.83 million thanks to marketing investments both before and during the World Cup. This marked Kindred’s second highest quarterly customer base ever.

During an exclusive conversation with iGaming NEXT, CEO Henrik Tjärnström revealed it was rather a quarter of “what could have been” for Kindred Group.

The operator’s Q4 sports betting margin came in lower than expected at 8.9%. If it had been closer to the rolling 12-month average betting margin of 9.4%, Q4 revenue would have come in approximately £10m higher, according to Tjärnström.

Regulatory headwinds in both Norway and Belgium caused Q4 revenue declines of 12% and 15% respectively when Kindred had actually anticipated revenue growth. This again led to an estimated £12m reverse swing in revenues.

Finally, Q4 saw Kindred make the biggest pay-out in its history after handing £4.4m to Jim “Mattress Mack” McIngvale on his bet for the Houston Astros to win the World Series.

“If you take those three elements, it would have meant around £25m more in revenues which would have changed things completely,” said Tjärnström.

News nugget

Kindred Group has set aside a provision of £7.1m for an imminent UK fine following a review into its Unibet and 32Red brands. That amount is based on continuing discussions with the UK Gambling Commission as the group awaits a final outcome from the regulator.

Elsewhere, Kindred has pledged to tackle the weaker than expected Q4 performance by taking immediate actions to improve profitability.

These includes reducing marketing investments in the US ahead of launching on its own platform in the States, having already withdrawn from Iowa.

Other measures include the “reprioritisation” of investment projects and the further optimisation of operating expenses.

“We’re really looking across the P&L and also the CapEx investments as we want to really make sure we are as optimised as we can be,” said Tjärnström.

When asked whether lay-offs were inevitable, the CEO said: “We’re trying to stop that problem before it arrives” and suggested a delay on new recruitment in the business.

Best quote

Tjärnström discusses Kindred’s World Cup disappointment:

“It was known in advance the disruption of the sports schedule that would happen during the fourth quarter. But we expected the tournament to actually compensate for that, and also to overcompensate for the slower period both before and after the tournament.”

As it was a World Cup quarter, Kindred increased marketing investments to 26% of gross winnings revenue, which is thought to have added pressure to short-term profitability.

The reduced calendar resulted in around 25% fewer top football league fixtures compared to Q4 of last year. Kindred’s World Cup turnover was not strong enough to reduce that impact.

Best question

Today’s award goes to Morgan Stanley analyst Ed Young. Zooming in on Belgium, Young asked why Kindred had reported a revenue dip of 15% when Entain had reported double-digit growth and a large private competitor had also reported a “much milder” impact.

Tjärnström said Kindred had suffered from being a clear market leader in Belgium after the new deposit limits had spread customers across more operators. “In that sense, we’re probably a little bit more impacted than smaller operators in the market,” he added.

Current trading and outlook

In a new trading update Kindred said average daily gross winnings revenue for the group up to 5 February 2023 was £3.7m, a 36% uptick on the whole of Q1 last year. That rise drops to 9% when excluding for the Netherlands.

Gross winnings revenue from sports betting has also been positively impacted by a stronger sports betting margin of 12.2% after free bets over the same period, compared to 10.2% for the whole of Q1 2022.

The Stockholm-listed operator’s share price ticked 6% higher at one point in early trading. Many of the headwinds were previously communicated in a trading warning on 13 January 2023.

Underlying EBITDA for full-year 2023 is estimated to reach at least £200m, assuming a long-term average sports betting margin.

London-based investment bank Peel Hunt expects Flutter Entertainment, Entain and 888 to be positively transformed over the course of the next few years.

Today (2 September), Peel Hunt gaming analyst Ivor Jones explained in a note to investors why in his opinion, all three companies are undervalued.

“888, Entain and Flutter are all cash-generative businesses, but near-term cash flow is being held back by investment,” Jones said.

Transformation is ahead, however, believes the London-based investment bank. In the case of Flutter and Entain, this will come from the swing into profitability of their US businesses during 2023. In the case of 888, it should come from paying down the William Hill debt burden.

The investment bank pointed out the valuations of Entain and Flutter’s US offshoots are pivotal to their share prices.

Jones believes investors will give more credence to long-term potential once these companies become profitable, and that investors will pay more for growth after that point, although that requires patience.

Even though 888 has more modest plans in the US via its Sports Illustrated sportsbook, success for 888 in that market would also prove positive for its valuation too, Jones wrote.

In its analysis, the investment bank compared the operators’ EV/EBITDA multiples on two bases: first, based on forecast EBITDA; and next by excluding the contribution of the US businesses from the EBITDA but including their value as if they were standalone assets, based on Peel Hunt’s proprietary 2025 estimates.

As a result of these workings, Flutter’s EV/EBITDA multiple falls from 13.9x in FY23E to 8.3x in FY26E. However, assigning a £16bn asset value to Flutter’s US business (FanDuel) sees the implied multiple on the ex-US business fall from 3.7x to 2.0x.

Jones highlighted that Flutter has increased its debt through the recent acquisition of Sisal, and forecast that Flutter will not fall within its 1-2x target net debt/EBITDA range until 2024.

“From that point, while still investing in growth, we forecast that Flutter could pay a yield rising from 3.3% in FY24E up to 11% in FY26E,” said Jones.

In light of its analysis, the investment bank increased its target price for Flutter from 14,500p to 16,000p.

Switching to Entain, which is live in the US via BetMGM, Jones said the operator’s EV/EBITDA multiple falls from 9.1x in FY23E to 5.3x in FY26E. “However, assigning a £6.5bn value to Entain’s US business sees the implied multiple on the ex-US business fall from 2.7x to 1.2x. At our target price, those adjusted multiples would fall from 7.0x to 5.0x,” he said.

Entain is to increase its debt through the planned acquisition of SuperSport, and the investment bank forecast that it will not fall within its 1-2x target net debt/EBITDA range until 2024. From then on, Peel Hunt forecasts that Entain could pay a yield rising from 2.7% in FY24E up to 12% in FY26E.

888 is the most undervalued of the three companies, according to the bank’s analysis.

With the US (SI Sportsbook) a much smaller part of 888’s business, the two different valuation approaches result in multiples much closer to each other: “5.4x FY23E EBITDA including the US losses in EBITDA, and 4.4x attributing a value of £300m to what is more an option than a business in the US at present.

“888 has taken on a very material level of debt through the William Hill acquisition, and we forecast that it will not fall within its 2-3x target net debt/EBITDA range until 2026E,” Jones said.

At that point though, 888 could pay a yield of 38.1%, according to Jones, who acknowledges this “is a long time to wait in uncertain markets”.

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