Entain, the Ladbrokes owner, has suffered an unjustified 45% share price decline this year despite improving fundamentals, JP Morgan said as it reiterated its ‘overweight’ rating.

The bank expects robust UK online momentum and a stabilising position in the US to support the gambling group, while Brazil’s move towards a full gambling ban represents a manageable headwind.

JP Morgan estimates the Brazilian regulatory change will reduce earnings before interest, tax, depreciation and amortisation by about 2.5%, but said the impact is already reflected in its forecasts.

The broker also sees the Brazilian first-round election as supportive and views the regulatory change as a potential clearing event for the company.

JP Morgan identified a clearer medium-term path to cash flow generation and lower leverage, supported by the roll-off of payments to HM Revenue & Customs and the potential sale of Entain’s stake in its central and eastern European operations.

The bank said those developments could provide catalysts for the shares and unlock value through a sum-of-the-parts valuation, although the timing remains uncertain.

JP Morgan placed Entain on a positive catalyst watch ahead of its third-quarter trading update on 15 October.

The bank retained its ‘overweight’ rating but cut its December 2027 price target to 965p from 1,050p, reflecting the impact of Brazil and a higher discount applied to the equity because of regulatory risks.

Analyst Estelle Weingrod said the lower target still left scope for significant upside from current levels, with the broker seeing value in Entain as operational momentum improves and deleveraging becomes more visible.