Sports betting and gaming group Entain (LON: ENT) will face significant headwinds if the UK government considers a potential tax hike on the gambling industry, according to a note from Goldman Sachs.

According to a recent report by The Guardian, the Treasury is exploring proposals to double certain gambling taxes in the upcoming budget.

Goldman Sachs analysts warned that such a move could “disproportionately impact” Entain’s earnings and valuation compared to its competitor, Flutter.

The report from The Guardian comes as the government seeks to address a budget deficit. While the exact details of the proposed tax increases remain unclear, the publication said its sources suggest that online casinos and bookmakers could be particularly affected.

Goldman Sachs’ analysis indicates that a severe scenario, where all online gambling taxes are doubled and there is a 50% migration, could result in a roughly 10% impact on Group EBITDA for both Flutter and Entain.

However, Entain is projected to experience a more significant impact at the net income level and on its equity value.

“Under our assumption of 50% migration, the impact on Group EBITDA would be c.10% for Flutter and Entain, but involve a disproportionately higher impact for Entain at the net income level and on equity value,” wrote the bank.

The potential tax hike has raised concerns among industry experts, who argue that it could harm the sector and lead to job losses.

Entain’s stock price has had a tough 2024, down around 25%. However, it jumped over 4% on Thursday after a Q3 trading update, which saw it raise its FY24 guidance. The company now expects EBITDA to be towards the top of the £1.04 billion to £1.09 billion guidance range.