Broker tips: Entain, Rightmove, Celebrus Technologies

(Sharecast News) - Goldman Sachs double downgraded its stance on Ladbrokes and Coral owner Entain to 'sell' from 'buy' on Monday and slashed its price target on the stock to 820.0p from 1,450.0p, stating it now believes the inflection of fundamentals will take longer to come through, leading it to cut its estimates for FY24/25 earnings per share by around 30%. "We have been wrong on Entain, because of: (1) disappointing online growth (owing to a mix of regulatory headwinds, competition, market dynamics, and unfavourable sports results) contributing to material downward consensus EPS revisions; (2) JV BetMGM losing market share in the US; and (3) a larger-than-expected £585mn HMRC settlement," Goldman Sachs said.

GS said its previous 'buy' rating thesis looked for online growth to inflect from 3Q23. It also looked for the US joint venture to become meaningfully profitable in 2024 and potentially return capital to the parents - acting as a catalyst for the JV's value to be recognised within Entain - together driving a re-rating from a seemingly attractive EV/EBITDA multiple on its prior estimates.

Goldman said that on its new estimates, it views Entain's valuation as relatively demanding on fundamentals, when set against its broader coverage. As such, absent external catalysts such as an approach, GS would expect the shares to continue to underperform within its coverage on a 12-month view owing to a weaker near-term online growth outlook and the fact that downward EPS consensus revisions are not yet over.

Numis has upgraded its rating for Rightmove from 'add' to 'buy' after a bullish trading update from the property portal on Monday, highlighting an attractive entry point after the stock's recent falls.

Rightmove said that trading since July has been ahead of consensus expectations, and it now anticipated average spend per advertiser for the full year to reach between £112 and £116, exceeding the previous guidance of £103 to £105.

Looking ahead, Rightmove maintains confidence in its full-year outlook for 2023, expecting revenue growth in the range of 8% to 10%, underlying operating profit growth of 7% to 8%, and an underlying margin of approximately 73%. Numis said this pushes up its estimates a little, lifting its target price on the stock fro 660.0p to 675.0p.

"Shares have come under considerable pressure on the back of the recent announcement that CoStar is looking to acquire OntheMarket. We feel the risk to Rightmove is overstated, see the current fall as an attractive entry point," Numis said.

Analysts at Canaccord Genuity reiterated their 'buy' rating and 330.0p target price on software and services firm Celebrus Technologies on Monday, stating the firm's interim results had provided "additional colour" with some "encouraging takeaways" for investors.

Canaccord Genuity said Celebrus' October update already suggested "a more balanced" revenue weighting this year, with the successful conversion of larger deals driving 60% year-on-year sales growth to £13.0m and a small H1 pre-tax profit.

The Canadian bank said the £13.0m in sales delivered in 1H made up roughly 40% of its full-year forecasts, which was "well ahead" of the 30% historic average. With the small pre-tax profits generated in the half also being above the typical "modest loss" in the period, the analysts noted that these results "somewhat de-risk" the back-half weighted H2 seasonality this year.

"We leave our forecasts unchanged which continue to expect operating leverage to drive 100-200bps annual adj. EBIT margin expansion from here, leading to an expected "sector top quartile" 24% FY23-26E EPS CAGR. The shares' current 14.7x cal. 2024E P/E and 1.6x EV/Sales multiples in our view significantly undervalue this 'best of breed' first-party customer data collection & integration platform with a blue chip customer base," said Canaccord.