Why Macquarie tips the Tabcorp (ASX:TAH) share price to jump 22%

The experts at Macquarie have chimed in with their analysis on Tabcorp's prospects.

The Tabcorp Holdings Limited (ASX: TAH) share price is crawling higher in afternoon trade today and is currently up 0.57% to $5.29.

As of today Tabcorp shares have reached a new 52-week high, after rallying 10% in the last month and being added to the S&P/ASX 50 Index (ASX: XFL) in September.

Two men excited to win online bet

Image source: Getty Images

Gambling giant on a winning run

Tabcorp shares made a jump late last month. This coincided with the NSW Premier's roadmap navigating the reopening of NSW's economy, once the state hit an 80% double vaccination target.

The gambling services company saw its share price climb 8.5% in the week or so following the government's announcement, as investors regained confidence in a more favourable consumer environment.

Tabcorp shares popped once more on 11 October, the same day NSW announced it was reinstating a suite of "freedoms" after hitting the required vaccine numbers.

And since, the Tabcorp share price has shown no signs of slowing.

As the easing of Covid-19 related restrictions begins to ramp up over the coming months, many investors are wondering, can Tabcorp shares sustain this momentum?

One leading broker has weighed in on the debate, and offered its opinion on the Tabcorp share price.

Can the Tabcorp share price continue charging higher?

Analysts and investment banking giant Macquarie Group Ltd (ASX: MQG) certainly think so, and see the winding back of restrictions as a big plus to the company's future prospects.

The broker anticipates an improved gaming and wagering environment as more and more lockdown mandates ease.

It also reckons this improved environment is accretive to Tabcorp's earnings, and could attract investors betting on a "reopening play".

Consequently, it has upgraded its FY22 and FY23 earnings before interest, taxes, depreciation, and amortisation (EBITDA) forecasts by 3% and 4% respectively, baking these many growth levers into its modelling.

Aside from this, Macquarie also believes Tabcorp's demerger from its lotteries business earlier this year will be a catalyst to drive valuations into the coming years.

This is compounded by the low EBITDA multiple the broker assigns on Tabcorp's wagering segment.

As a result of its analysis, Macquarie expanded its price target by 1.6% to $6.55, implying a 23% upside potential from the current market price.

The Tabcorp share price has climbed 36% this year to date, and 56% over the past 12 months.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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