Endeavour Group Ltd (ASX: EDV) shares are sinking deep into the red on Monday.
In early trade, the drinks company's shares are down 8% to a 52-week low of $5.76.
This latest decline leaves the Endeavour share price is down 28% over the last 12 months.
Why are Endeavour shares falling?
Today's decline appears to have been driven by concerns over the impact that a surprise announcement by the Victorian Government over the weekend could have on its operations.
The announcement reveals that the state government plans to make key changes to pokie machines in order to reduce gambling harm. This includes capping load-up limits at $100 instead of $1,000, as well as closing gaming machine areas in venues from 4am to 10am (except in casinos).
Should you buy the dip?
Goldman Sachs has been looking at the impact that these changes could have on Endeavour's performance.
While the broker believes the news is a negative, it feels that it has already been captured in its lower risk-adjusted valuation.
As a result, the broker has retained its buy rating and $7.50 price target on the company's shares. This implies a potential upside of greater than 27% for investors over the next 12 months.
Goldman also expects a 4.1% dividend yield in FY 2024, making the potential return on offer even more attractive.
The broker commented:
Whilst the latest unexpected announcement of VIC gaming regulation tightening is a negative catalyst and we would expect the stock to trade lower, we note that we have already earlier reduced the Hotel EV/EBIT to a lower 12x 1yr fwd multiple in our SOTP valuation to reflect the higher operational risk. We await further implementation details/EDV commentary to assess specific magnitude and timing of impact. We continue to see EDV's Retail Division, which we value at 19x FY24e EV/EBIT to be performing strongly as the clear market leader.
