Tabcorp Holdings Limited (ASX: TAH) has seen its stock garner increased attention following an upgrade by UBS, reflecting growing confidence in the company’s strategic improvements. The upgrade comes amidst mixed signals, with other analysts adopting a more cautious stance.
UBS upgraded Tabcorp to ‘Buy’ from ‘Neutral’, significantly raising the price target from A$0.68 to A$1.12. This revision is based on what UBS sees as encouraging fiscal 2025 results and early indications that Tabcorp’s strategic initiatives are gaining traction. However, not all analysts share the same level of optimism. Macquarie Research, in August 2023, maintained a ‘Neutral’ rating with a one-year price target of A$1.23, based on projected revenue growth of 3.65%.
Price Targets
Tabcorp shares have been on the move higher recently, with a gain of 33.56% over the past month of trading. While specific intraday movements are subject to market fluctuations, the upgrade is seen as a positive catalyst.
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Adding to the complexity, Tabcorp reported a 6.1% decline in revenues for the first quarter of fiscal year 2024, citing a “softer trading environment.” This decline was evident across its segments, including a 5.4% drop in wagering and media revenue and a more pronounced 12.7% decrease in gaming services revenue. I
A positive development for Tabcorp was the extension of its digital vision supply agreement with Sportsbet for another 10 years, now running until July 31, 2036. This extension is projected to contribute between A$30 million and A$40 million in EBITDA for fiscal year 2024. In response to the extension announcement, Tabcorp’s shares rose by up to 1.40% to reach A$1.0775.
The UBS upgrade provides a bullish signal, the mixed analyst sentiment and recent revenue decline highlight the challenges Tabcorp faces. The extension of the Sportsbet agreement offers a degree of stability, but the company’s ability to execute its TAB25 strategy in a competitive market will be crucial for sustained growth.
