Revenue from online betting in US states has been higher than Citigroup expected, which bodes well for the likes of Entain PLC (LSE:ENT) and Flutter Entertainment PLC (LSE:FLTR).
The broker said it is “increasingly bullish on the size of the US prize”.
It is now forecasting what it calls a “long-term EBITDA [underlying earnings] opportunity of US$9.3bbn,” which is double what it expected this time last year.
The revenue generated in states that have legalised online sports betting has been higher than Citi had anticipated and over the long-term it is expecting the major players to generate a US EBITDA margin of 30%.
“Further, we expect Flutter and Entain's market dominance to continue, while Evolution's product quality should drive its strong US positioning. As a result, the value we ascribe to the US has increased 40%/24%/45% for Entain/Evolution/Flutter, with the US now 38% of the value in our target price for Entain, 20% for Evolution and 50% for Flutter, the broker said.
Paddy Power owner Flutter has been upgraded to ‘buy’ from ‘sell’ while the ‘buy’ rating on Entain has been reiterated.