Bolstered by robust performance in its iGaming and sports betting sectors, BetMGM increased its financial outlook for 2025, affirming its expectation to achieve $500 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) in the forthcoming years.
The 50/50 partnership between Entain (OTC: GMVHY) and MGM Resorts International (NYSE: MGM) anticipates 2025 EBITDA to reach $100 million with revenues of $2.6 billion. That increases from earlier predictions of only achieving EBITDA positivity on revenues of $2.4 billion to $2.5 billion.
"BetMGM remains excited about the significant opportunities ahead. Its strengthened business, revised strategic approach, and performance momentum, further reinforce its confidence in future growth prospects and pathway to $500 million EBITDA in the coming years,” according to a statement issued by the gaming company.
In after-hours trading, MGM's stock increased by 8.67% following the news, while Entain rose by 13.45%. BetMGM stated that its trading so far this quarter aligns with the 34% year-over-year growth achieved in the first quarter of the year.
Entain Shares Priced Low Compared to BetMGM Results
In February, BetMGM predicted net revenue for 2025 to be between $2.4 billion and $2.5 billion. The operator observed that its first-quarter sportsbook figures benefited from better engagement and product improvements, along with a focus on what it termed as premium-mass bettors.
DraftKings (NASDAQ: DKNG) and Flutter Entertainment’s (NYSE: FLUT) FanDuel lead the US online sports betting market, yet BetMGM stands out as one of the few other competitors to capture significant market share in this area while demonstrating strength in the iGaming sector. Despite those arguably remarkable accomplishments and BetMGM’s attractive forecast for 2025, some analysts contend that Entain's stock is undervalued.
“Entain trades on 8.4x EV/EBITDA for FY25E. Ongoing positive BetMGM commentary from today’s update and the late April update is at odds with Entain’s valuation that appears to attach little value to Entain’s BetMGM stake,” observes James Wheatcroft of Jefferies. “A sum of the parts implies £13.00, (25% discount to the DKNG’s multiple for ENT’s 50% BetMGM stake) and a c11x recent regulated market transaction multiple for the Online core.”
BetMGM mentioned that online sports betting will provide a favorable earnings boost this year, while iGaming will also make a significant contribution. The operator plans to announce results for the first half of 2025 on July 29.
BetMGM's Strength May Restrict Entain's Willingness to Sell
Improvements in both top and bottom lines at BetMGM, along with the momentum not apparent in Entain’s share price, as argued by Wheatcroft, may motivate Entain to stay involved in the joint venture instead of pulling out.
Earlier this year, Bloomberg Intelligence assessed that Entain’s 50% stake in BetMGM is valued between $4.2 billion and $5.6 billion. The company's existing market value stands at $6.52 billion, suggesting that the idea of the stock price not mirroring positives in the online gaming division has merit.
MGM management has expressed a strong desire to oversee all of BetMGM, yet it has not resumed negotiations since proposing $11.06 billion in January 2021 for the whole of Entain. That offer was declined as insufficient, and the negotiating process quickly became chaotic when DraftKings nearly doubled MGM’s proposal. During the past four years, analysts have often theorized that MGM would make another bid for Entain or the portion of BetMGM it does not own, but it has not occurred yet.