JP Morgan has reiterated its 'overweight' rating on Entain, the gambling group, and placed the stock on its Catalyst Watch list ahead of third-quarter results on 15 October.
Analyst Estelle Weingrod trimmed the price target to 965p from 1,050p, reflecting Brazil's regulatory headwinds and a higher equity discount rate applied to account for broader regulatory risk.
Entain shares have fallen 45% so far this year against a 5% gain for the FTSE 350 Travel and Leisure index, but JP Morgan argues the sell-off is largely unwarranted given improving fundamentals.
The bank highlights strong momentum in UK online gambling and a stabilising position in the United States.
Brazil's move toward a full online gambling ban creates a headwind of around 2.5% to earnings before interest, tax, depreciation and amortisation (EBITDA).
But JP Morgan says this is now embedded in its forecasts and treats the development as a clearing event for the stock.
The first-round Brazilian election results were seen as supportive.
The note tests fair value across a range of earnings multiples in both base and bear case scenarios, including the potential impact of a higher UK machine games duty.
JP Morgan also identifies a clearer medium-term path to debt reduction, underpinned by two potential catalysts: the roll-off of an HM Revenue & Customs (HMRC) liability, and a possible sale of Entain's central and eastern European (CEE) operations.
A disposal of the CEE business could unlock additional value through a sum-of-the-parts rerating, though timing remains uncertain.
