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(Sharecast News) - JPMorgan upgraded Ladbrokes owner Entain on Tuesday to 'overweight' from 'neutral' as it said market share momentum appears to be more resilient than initially anticipated, with a solid third-quarter performance delivered despite the lapping of some of these easy comps.
This implies a sequentially improving underlying momentum, the bank said. In the UK specifically, Q3 online net gaming revenue growth was 15% after 21% growth in the first half, despite comps somewhat normalising quarter-on-quarter, it said, "demonstrating a supportive momentum overall".
The bank also said that the new strategy at BetMGM, its joint venture with MGM Resorts, was bearing fruit and that it expects BetMGM to hit its $500m EBITDA target by FY27. Starting this year, BetMGM will be distributing most of its EBITDA - net of a 50m annual capex - to both parents, which should essentially help bolster Entain's own cash, it said.
JPM also highlighted Entain's "relatively well diversified portfolio", which it said adds an element of defensiveness versus some of its peers and said the stock's valuation looks appealing, with the firm still trading at the low end of the peer group range.
JPM also cut its price target on Entain to 1,090p from 1,150p.
Trainline tanked on Wednesday after JPMorgan downgraded its stance on the shares to 'underweight' from 'neutral' and cut the price target to 230p from 300p.
The bank said the downgrade was down to a less favourable operational set-up into 2026, and ongoing - and arguably heightened - regulatory and competitive risk. JPM also said it sees growing uncertainty on the evolving AI landscape as an added overhang to the investment case.
"Near-term, the government's announced freeze in regulated rail fares across England is set to pressure stalling UK consumer net ticket sales (flat in FY27E), while this week's government announcement underwrites ambitions for GBR to create a government-backed digital retail platform (website & app) - paving the way for a more consolidated and competitive landscape in years to come," it said.
"While mindful of strong cash generation and sizeable shareholder returns (150m SBB ongoing, JPMe 75m recurring from FY27E), we see negative risk/reward from growing risk of serving an increasingly regulated and nationalized market, with a growing theme of AI disruption potentially commanding increased efforts to maintain Trainline's leadership position."
Citi upgraded Drax on Wednesday to 'buy' from 'neutral' and lifted the price target to 850p from 689p as it pointed to limited downside risk.
"Whilst we remain inherently sceptical of biomass as an economically viable, clean and sustainable technology, the signed government CFD extension to 2031 has prolonged Drax's asset life, dampened its cashflow cliff and bought company time to explore other strategic opportunities," the bank said.
"With old generation sites redeveloped for AI/data centre usage sold and option for inertia contracts, it's hard to ignore potential value of 'old-world' assets at Drax, which historically been valued at zero."
Citi also said that under a blue sky scenario, it sees a further circa 270p a share of potential value creation.