Ladbrokes owner Entain hikes guidance for US joint venture

Entain PLC has raised its full-year revenue guidance for its US joint venture, BetMGM, to at least $2.6 billion, exceeding the previous range of $2.4-2.5 billion, driven by strong performance in online sports and iGaming. The company now anticipates BetMGM's underlying earnings (EBITDA) to surpass $100 million, a significant increase from prior expectations of simply being EBITDA positive. This upward revision reflects continued positive momentum from Q1, with revenue growth remaining consistent at 34% and reinforces confidence in reaching $500 million of EBITDA in the coming years.

Analysis

Entain PLC has issued a significant upgrade to its full-year outlook for BetMGM, its US joint venture with MGM Resorts International, signaling robust operational performance and accelerated growth. The revised guidance anticipates net revenue for BetMGM to reach "at least $2.6 billion," surpassing the upper end of its prior $2.4-2.5 billion range. More critically, underlying earnings (EBITDA) are now projected to exceed $100 million, a substantial improvement from the previous, less specific indication of merely being "EBITDA positive." This upward revision is attributed to sustained "positive momentum" carrying over from a strong first quarter, where net revenue growth was "broadly consistent" with the 34% reported previously, continuing into June. Both online sports betting and iGaming are expected to contribute positively. This enhanced current year performance, driven by what Entain describes as BetMGM's "strengthened business, revised strategic approach, and performance momentum," also bolsters confidence in achieving the longer-term target of $500 million in EBITDA in the coming years. The strongly positive sentiment associated with this announcement for both Entain (LSE:ENT) and MGM Resorts International (MGM) reflects the market's favorable interpretation of this improved financial trajectory for their strategically important US venture.

Key Decisions for Investors

• Investors in Entain (LSE:ENT) should consider the upgraded BetMGM guidance as a material positive, potentially justifying a re-evaluation of the company's growth prospects and earnings contribution from its US operations.
• Shareholders of MGM Resorts International (MGM) should note the enhanced earnings potential from their 50% stake in BetMGM, which positively impacts MGM's outlook and diversification in the high-growth US digital gaming market.
• Both Entain and MGM investors should monitor BetMGM's execution towards its newly reinforced current-year targets and the ambitious $500 million EBITDA goal, as sustained achievement will be key to realizing the joint venture's full valuation potential.