The Endeavour Group Ltd (ASX: EDV) share price is out of form again on Monday.
In afternoon trade, the drinks company's shares are down over 1% to $7.08.
This means the Endeavour share price is now down 15% since this time last month.
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Is the Endeavour share price good value?
While the recent weakness in the Endeavour share price may be disappointing for shareholders, one leading broker sees it as a buying opportunity for the rest of us.
According to a note out of Goldman Sachs, its analysts have retained their buy rating and $8.10 price target on the company's shares.
Based on the current Endeavour share price, this implies potential upside of over 14% for investors over the next 12 months.
Goldman is also expecting an attractive ~3% dividend yield from its shares in FY 2023, which stretches the total potential return beyond 17%.
What did the broker say?
The broker notes that the Tasmanian government intends to introduce a state-wide player card system to provide harm protection to those most at risk of problem gambling.
This would limit player losses to a maximum of $100 per day, $500 per month, or $5000 per year.
However, Goldman believes this will have an immaterial impact on Endeavour's performance due to the size of the Tasmanian market. And even if the same system was introduced across the country, its analysts don't believe the impact will be overly material.
The broker commented:
EDV has 150 Gaming Machines in TAS (c. 1.2% of total machines) which we estimate contributes to A$6mn in revenue (0.1% of group).
We do not see any signs of this impacting any other states; however, if this was to be extrapolated outside of Tasmania, we estimate that 3.75% of industry gaming expenditure would be impacted, translating to 0.3% of sales or 3.8% of PBT for EDV.
And while Goldman acknowledges that this could weigh on sentiment slightly, it continues to rate Endeavour's shares as a buy and remains very positive on the company's long term growth outlook. It concludes:
In our view, while this may offer short term overhang, we have a more constructive view on EDV's longer term growth aspirations as it may accelerate the speed of independent publicans exiting the industry due to the increasing cost and complexity of the operating environment. Given we see an immaterial impact of the standalone Tasmania announcement and no signs of roll-out beyond Tasmania, we make no changes to our existing forecasts and maintain our Buy rating.
