Investment

Sell-Side Opinions: Entertainment & Leisure - Jan 31, 2026

Distilla AI

— 12 min read

Editor's Notes:

  • We conducted a quick survey of recent research reports on the Entertainment & Leisure sector, following two key events:
    • Konami: Rose 8% yesterday, driven by positive mobile gaming momentum and an upward revision to guidance.
    • Sands China: Fell 7% on Thursday, Jan 29, due to disappointing earnings (margin contraction, unfavorable mix, and high costs).

A few potential interesting names to check out:

  • Entain: An interesting turnaround story at a reasonable valuation.
  • Flutter: While a high-quality name, US prediction markets and regulatory uncertainties make it a difficult bet at the moment. Anyone with a view on these, can time and buy/sell.
  • Konami: May benefit from upcoming global sporting events this year, offering short-term momentum.
  • Galaxy Entertainment: As a cyclical recovery play, it appears better positioned for the Macau gaming recovery, whereas Sands China’s underperformance seems company-specific.

The Entertainment & Leisure industry faces significant shifts in 2026, marked by slowing growth in US online sports betting and rising regulatory scrutiny over prediction markets. Despite these challenges, sectors like Japanese mobile gaming and theme parks demonstrate resilience through strategic pricing and digital strength. Key takeaways point to a re-evaluation of long-term growth potentials in some segments, alongside strategic M&A and operational efficiencies driving value in others.

Key Narratives, Catalysts, and Developments by Geo / Sub-segment

Online Sports Betting & iGaming Performance

  • Moderating Handle Growth & Hold Rate Volatility: The US Online Sports Betting (OSB) market is experiencing slowing handle growth. New York, a bellwether state, saw its weekly OSB Gross Gaming Revenue (GGR) track down 32% YoY for the week ending January 25th (NFL Conference Championship Week). This occurred despite a +2% YoY handle growth, implying a very unfavorable 4.7% hold rate. This marks the fourth consecutive week of low/negative handle growth in NY and follows a December where handle broadly declined across the US.

How are Prediction Markets impacting the Gaming Sector?

Concerns around prediction markets are a major theme, weighing on the sector (FLTR/DKNG/ENT down c.8% recently). The legality and regulatory status of PMs are highly debated.

  • Regulatory Scrutiny: Ohio regulators are actively building a case against PMs, citing the recent Massachusetts court ruling against Kalshi as supplemental authority. The Nevada Gaming Control Board has filed a civil enforcement action against Polymarket for unlicensed wagering.
  • Industry Division: Sportradar and OpenBet, alongside major operators DraftKings, FanDuel, and Fanatics, have notably exited the American Gaming Association (AGA) due to disagreements over prediction markets.
  • Potential for Mainstream Adoption? Despite regulatory pushback, there's a development that DraftKings and FanDuel could have parlay-style products available for their new prediction markets just days before Super Bowl LX, indicating an intent to push into this space aggressively. CFTC Chair Michael Selig announced plans for new, clearer rules for prediction markets, and crucially, withdrawal of prior proposals to ban political and sports event contracts, suggesting a path to regulated operation.

What are the Latest State Launches and Legalization Efforts?

  • Missouri OSB Launch: December 2025 saw Missouri launch OSB with reported handle of $539m (in line with expectations), GGR of $104m, and promotions of $125m, resulting in a negative Net Gaming Revenue (NGR) of -$21m. The promo rate was high (23% of handle). Missouri's annualized handle/adult of $119 is 67% higher than the average for recently launched states. FanDuel led with 39% handle share, followed by DraftKings (36%).
  • Virginia iGaming: SB 118 to legalize online casino gaming has advanced, incorporating stronger consumer safeguards and problem gambling protections.
  • South Dakota OSB: SJR 504 proposes a constitutional amendment to allow statewide online sports betting.

Other Significant Regulatory Actions

  • New York Assembly introduced a bill to ban prop bets (opposed by Senate counterpart).
  • Tennessee lawmakers aim to block sports betting access on public college campuses.
  • Maine legislator proposes banning credit card use for online sports betting.
  • Maryland and Mississippi are moving to ban unlicensed interactive games like sweepstakes casinos.

What are the major developments in European & UK Gaming?

  • Regulatory Headwinds: The UK government is consulting on plans to raise gambling license fees by 20-30% starting October 2026, with proposals for an extra 10% to fight illegal gambling.
  • Market Developments: Finland is preparing to open its new gambling market with license applications starting March 2026. Russia's Ministry of Finance is considering legalizing online casinos to combat the illegal market.
  • Greece (OPAP): The upcoming business combination of OPAP and Allwyn remains a key catalyst, with the cash exit condition for shareholders recently waived. There's an external risk from MSCI's potential upgrade of Greece to Developed Market (DM) status in August 2026; if Allwyn's free float doesn't meet the minimum $4bn requirement, it could be excluded from the MSCI DM index, triggering outflows of ~$496m.

Japan Theme Parks (Oriental Land): Pricing and Catalysts

  • Strategic Pricing: Management intends to proactively implement pricing measures based on enhancing park and experience value. Ticket prices for a 1-Day Passport (adult) are set to rise by an average of 5% from April 2026, signaling confidence in guest price tolerance.
  • Lack of Near-term Catalysts: New attractions like Wreck-It Ralph (Sugar Rush) and Space Mountain renewal, along with DPA (Disney Premier Access) pre-visit purchasing, are scheduled for 2027, indicating a gap in immediate drivers.
  • Inbound Tourist Impact: Downside risk from lower inbound tourists from China due to rising tensions, though China accounts for only a little over 10% of overseas guests, limiting overall earnings impact.

Japan Video Games (Konami Group): Digital Strength

  • Digital Entertainment Strength: The core digital entertainment business (eFootball, Professional Baseball Spirits A) is performing strongly, particularly mobile games.
  • Sporting Events Catalysts: Global sporting events like the 2026 World Baseball Classic and 2026 FIFA World Cup are expected to drive user numbers and monetization. eFootball has already seen increased user numbers in North America and emerging markets.

Macau Gaming: Mixed Recovery Performance

  • Mixed Performance: Sands China's Q425 EBITDA missed consensus due to slower base mass recovery, a less favorable mix (VIP and premium mass growing faster), and higher costs (e.g., one-off NBA games).
  • Industry Recovery: However, Macau's GGR for the first 25 days of January 2026 reached MOP17.8bn (+21% YoY). Expectations for January GGR growth are around +15% YoY (Morgan Stanley) or +18.5% YoY (Bloomberg consensus). February is also expected to benefit from the full CNY holiday period. This suggests broader industry recovery, despite some individual operator misses.

China Hotels: Sustained Travel Recovery

  • 2025 domestic travel spending grew 10% YoY, and travel volumes increased 16% YoY, surpassing 2019 levels (109%). Per capita spending has recovered to 2019 levels. Q1 26 RevPAR growth is expected to be positive.

By-Company Updates, Narratives, Key Numbers, Valuation, Debates and Takeaways

Flutter Entertainment (FLTR LN): Navigating US Market Evolution

Company Narrative and Performance Summary

Flutter is recognized as a "best-in-class B2C gaming operator" with a strong moat. It shows strong operational momentum in Q4 25, benefiting from favorable win margins, though its long-term growth trajectory in the US is being re-evaluated for conservatism.

Valuation Analysis and Price Target

J.P. Morgan's Price Target (PT) for Flutter was reduced from 25,300p to 19,600p. This is based on a Sum-of-the-Parts (SOTP) valuation: 11x FY28e EBITDA for non-US online, 5.5x for Retail, 13x FY28e EBITDA for US business, and includes a 10% discount for regulatory uncertainty.

Debates and Investor Takeaways

The primary debate revolves around the sustainability and normalization of US handle growth, especially with the emergence of prediction markets. J.P. Morgan still views Flutter's growth algorithm positively (~20% EBITDA and 30% EPS 3-year CAGR). Management's comfort with FY27 guidance in light of tax rate changes and prediction markets will be key for upcoming earnings.

Entain PLC (ENT LN): Turnaround and Profitability Inflection

Company Narrative and Performance Summary

Entain is undergoing a noteworthy turnaround with improved underlying topline momentum in the UK, US, and CEE. BetMGM is showing profitability inflection by targeting "premium mass" players. The stock trades at an appealing valuation after recent pressures.

Valuation Analysis and Price Target

J.P. Morgan's PT for Entain was lowered from 1,090p to 1,040p. This is based on SOTP: 8.5x FY27e EBITDA for non-US online, 5.5x for Retail, 10x FY27e EBITDA for BetMGM, and includes a 5% discount for regulatory uncertainty.

Debates and Investor Takeaways

Key focus will be on FY26 guidance for organic growth and EBITDA margin for ex-US Online, and NGR/EBITDA targets for BetMGM. Significant regulatory risks (tax increases, prediction markets, AUSTRAC investigation) remain.

Lottomatica (LTMC IM): Leading Italian Operator with Solid Fundamentals

Company Narrative and Performance Summary

Lottomatica is a leading Italian gaming operator distinguished by a strong omni-channel presence and solid fundamentals. It benefits from advanced regulation and market consolidation through M&A.

Valuation Analysis and Price Target

J.P. Morgan's PT for Lottomatica remains €31.00 (unchanged). This is based on SOTP: 9.5x FY28e EBITDA for online, 5.5x for retail, resulting in a blended 8.2x.

Debates and Investor Takeaways

While Q4 was impacted by sports results, the overall FY outlook is broadly unchanged. Guidance for FY26 is expected to be in line with previous years, maintaining a stable investment case.

OPAP SA (OPAP GA): Defensive Greek Operator with Merger Catalyst

Company Narrative and Performance Summary

OPAP is a Greek gaming operator characterized by a strong, defensive asset-light retail business model and a leading online presence. Its high FCF conversion allows for sustainable shareholder returns, with upside risk to estimates from post-COVID momentum and commercial initiatives.

Debates and Investor Takeaways

Q4 is expected to be decent, but the ongoing Allwyn merger and the potential risk of MSCI DM index exclusion for the combined entity (due to free float requirements if Greece is upgraded) are key external factors to monitor.

Oriental Land (4661.T): Tokyo Disney Resort's Long-Term Pricing Strategy

Company Narrative and Performance Summary

Oriental Land operates Tokyo Disney Resort. While management is positive on long-term growth in visitor numbers and sales per guest through strategic pricing, near-term catalysts are lacking due to new attractions scheduled for 2027. Capex remains elevated for new projects.

  • FY3/26 targets were left unchanged despite cumulative 1-3Q earnings ahead of guidance, as management considers Q4 risks (weather, overseas guests).

Debates and Investor Takeaways

A key debate centers on the pace of visitor growth and sales per guest against potential headwinds from inbound China tourism amid Japan-China tensions. Long-term pricing strategy, new attractions (Wreck-It Ralph 2027, Space Mountain renewal 2027), and Disney Premier Access services are promising, but their delayed impact results in a lack of short-term catalysts.

Konami Group (9766.T): Digital Entertainment Drives Growth

Company Narrative and Performance Summary

Overall Q3 profit missed estimates, but the core digital entertainment business (mobile games like eFootball and Professional Baseball Spirits A) performed strongly. Management is conservative with guidance, and upcoming global sporting events are expected to boost sales and user engagement.

  • Goldman Sachs reports Q3 operating profit of ¥37.5bn (below its estimate of ¥39.2bn and Bloomberg consensus of ¥39.5bn) due to a miss in non-digital entertainment.
  • Mobile game sales growth (+8% YoY) was below estimate (+14% YoY), but operating profit was 9% above estimate, attributed to lower marketing spend.
  • FY3/26 operating profit guidance was revised up to ¥123.0bn (below Goldman Sachs' prior estimate ¥131.1bn, but typically conservative).

Debates and Investor Takeaways

The strategic decision to control monetization and marketing spend in mobile games during Q3 suggests a focus on underlying user growth ahead of major sporting events. Upcoming events (World Baseball Classic, FIFA World Cup 2026) are significant catalysts for eFootball, especially given North American user growth.

Take-Two Interactive (TTWO): GTA VI Delay Overshadows Performance

Company Narrative and Performance Summary

Take-Two Interactive delivered strong Q3FY bookings performance, but this was overshadowed by the delay of GTA VI. NBA 2K and mobile segments continue to show strong trends.

  • J.P. Morgan notes that buyside expects 3QFY bookings upside based on healthy third-party data (GTA Online).
  • FY26 bookings guidance is $6.4-6.5bn.

Debates and Investor Takeaways

Investors are keen for any incremental GTA VI commentary, though minimal updates are expected. Focus will be on the sustainability of NBA 2K and mobile growth amid tougher comps, the future game pipeline, and expected gross margin compression in FY27.

Roblox (RBLX): Moderating Engagement and Margin Pressure

Company Narrative and Performance Summary

Investor sentiment towards Roblox is "controversial." Engagement trends are moderating, and the company faces tough comparisons, margin compression, and issues related to age verification.

  • J.P. Morgan notes that buyside expects 4Q bookings growth of 55-60% YoY (above company guide of 47-51% YoY).

Debates and Investor Takeaways

Key questions revolve around achieving 20% bookings growth in 2026 despite tough comps, the impact of age verification and the Russia ban on engagement/bookings, advertising ramp-up, and the magnitude of margin deleverage in 2026.

Bumble (BMBL): Caution on Revenue and Payer Headwinds

Company Narrative and Performance Summary

Investor sentiment for Bumble is cautious, with expectations of significant revenue and payer headwinds in Q4. Management notes Bumble app net adds to be down more than the prior quarter.

Debates and Investor Takeaways

Focus will be on whether the pace of net add declines will moderate after Q425, stabilization of attrition, the rollout of the new AI-native cloud platform, and plans to address debt due in 2027.

Toei Animation (4816): Major IP Momentum Lacking, New Dragon Ball as Catalyst

Company Narrative and Performance Summary

Toei Animation's Q3 operating profit exceeded consensus, but the overall impression is that major IP lacked momentum compared to the strong prior year. A new Dragon Ball anime series could be a significant future catalyst.

Debates and Investor Takeaways

The lack of momentum for major IPs (Dragon Ball, One Piece) in Japan and overseas is a concern. The upcoming new Dragon Ball anime series is expected to raise expectations for the Film and Licensing businesses.

Galaxy Entertainment (0027.HK): Macau Outperformer with Strong Position

Company Narrative and Performance Summary

Galaxy Entertainment is positioned as a relative outperformer in 2026 within Macau gaming. It benefits from zero royalty payments (unlike peers), a net cash position, and significant upcoming capacity additions (Phase 4).

Debates and Investor Takeaways

Expected to outperform consensus in Q4 25 due to high hold rates and leaner operating costs. Its premium valuation is expected to be maintained.

Sands China Ltd. (1928.HK): Q4 Miss and Operational Factors

Company Narrative and Performance Summary

Sands China's Q4 25 EBITDA missed consensus expectations, primarily due to specific operational factors rather than a broad market downturn in Macau.

Debates and Investor Takeaways

The miss was attributed to slower base mass growth (flat QoQ), an unfavorable mix (VIP and premium mass growing faster), and higher costs (e.g., $35m one-off NBA games). Promotional intensity is stabilizing, but the shift towards premium segments limits margin upside. Opex normalization is expected, with 2026 growth driven by wage inflation rather than capacity expansion.

Consensus and Debates / Diverging Views Among Reports

What is the Industry Consensus?

  • US OSB Handle Moderation: Multiple J.P. Morgan reports consistently highlight a deceleration or even decline in handle growth across key US states (e.g., New York, overall US in December). This is identified as a broad market trend impacting outlooks.
  • Prediction Markets as a Growing Concern: J.P. Morgan's Gaming reports uniformly identify prediction markets as a significant and complex emerging threat/opportunity, leading to increased regulatory scrutiny and internal industry disputes (e.g., withdrawal from AGA).
  • Flutter's Q4 Win Rates: Both the main Flutter preview and the broader "Gaming: Previews" report agree that Flutter's Q4 25 EBITDA will benefit from strong win margins ("favorable sports results") in the US, allowing for raised Q4 estimates.
  • Japan Gaming - eFootball Strength: Goldman Sachs and J.P. Morgan (APAC Consumer & Internet) agree on Konami's eFootball as a strong core title driving digital entertainment performance, despite an overall Q3 profit miss. Upcoming major sporting events are seen as positive catalysts.

Where are the Debates and Diverging Views?

  1. Flutter's Long-Term US Growth Trajectory (J.P. Morgan internal):
    • Main Flutter Preview: Explicitly lowers outer-year (FY26 onwards) estimates for Flutter's US business by 10% on average, and overall group estimates by 5%, due to moving to "more conservative handle assumptions" (a +6% CAGR vs. prior +9%) and no longer factoring in new state legalization. This represents a clear, downward revision in growth expectations.
    • Contrasting View within J.P. Morgan (Implied): While acknowledging slowing handle, the "Gaming: All In" report questions the reasons for Flutter's slowing handle growth ("is it self-induced? a function of lower player liquidity? prediction markets? or some combination"). This suggests a nuanced internal debate about the root cause and therefore the potential for recovery or long-term structural changes that might differ from the conservative assumptions adopted in the main preview.
  2. Macau GGR Forecasts (Morgan Stanley vs. Bloomberg):
    • Morgan Stanley: Projects January 2026 Macau GGR growth at +15% YoY.
    • Bloomberg Consensus (cited by Morgan Stanley): Forecasts January 2026 Macau GGR growth at +18.5% YoY.
    • This is a direct disagreement on the magnitude of the January GGR recovery, with Morgan Stanley taking a more conservative stance than the broader market consensus.
  3. BetMGM's New York Performance (J.P. Morgan):
    • The "Gaming: NY OSB for Week Ending 1/25" report notes BetMGM's unusually low hold rate (3.7% for the week, 5.0% 1QTD) compared to the NY state average, despite "well above" state handle growth (+30% week, +23% 1QTD). The report states this "won't do much to quell investor unease re: handle growth" and cautiously suggests it "could be promo-related."
    • This highlights a potential discrepancy between BetMGM's reported handle strength and its profitability metrics in a key state, raising questions about the quality of its revenue growth compared to competitors like FanDuel (who had a higher 5.6% hold for the week, 13.7% 1QTD).
  4. Internet SMID 2026 Guidance (J.P. Morgan): Cory Carpenter's "Internet SMID & Video Games: 4Q25 Earnings Preview" extensively flags "Beware of the 2026 Guide!" for several companies. This indicates a general market skepticism or internal J.P. Morgan view that consensus estimates for 2026 might be too optimistic, creating potential for negative revisions or soft guidance.
    • For Roblox (RBLX), the report highlights that the "Buyside bar for bookings growth is ~20%" while "EBITDA previously guided to slight compression (~100bps?)," suggesting investors are expecting strong growth but need to monitor margin impacts, a nuanced challenge for management.
    • For Yelp (YELP), J.P. Morgan notes that "Street estimates for 2026 do not include the Hatch acquisition," implying that current consensus might be understated and could see upside post-Hatch integration, a positive divergence from typical "beware" warnings.

Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.

Read more