888’s shares dipped yesterday when an analyst note suggested that the online gaming operator’s results, released earlier this week, showed consumer-facing growth had “halted abruptly” as the economic slump and currency fluctuations impacted player behaviour.
The note from investment bank Jefferies&Co downgraded the stock and said that until there were stronger signs of the business-to-business (B2B) operation delivering the promised new players and added growth, the shares were fairly valued at around 105p.
The shares ended Thursday down over 6 percent or 6.25p at 95.5p.
The note pointed out that underlying levels of trading at 888 were soft. “There has been an improvement since December’s nadir, but the core casino channel continues to be challenged and the first quarter is expected to be down on the fourth quarter overall,” said William Birch and Anna Barnfather at Jefferies
“With currency moves and lower gameplay impacting in the fourth quarter, this is already a soft comparison while the summer months are seasonally weaker: this all points to a lower run rate for the year than currently expected.”
The Jefferies team noted approvingly that the B2B operation – rebranded this week as Dragonfish – was a “credible” platform with a promising pipeline of partners.
The company this week announced a deal to provide a casino and poker offering for the Racing Post’s readership. Gigi Levy, chief executive at 888, said the firm was talking to 50 possible B2B partners, and was hoping that for this current year the division would contribute 50 percent of pre-tax profits.
But, as Jefferies noted, the B2B operation has yet to replace the growth that was coming from the consumer side. “We hope to see an early conversion of many of these potential partnerships, including some sizeable additions on the scale of the Sportech deal or bigger, but do not expect material uplift before the fourth quarter at the earliest.”
James Hollins, analyst at Daniel Stewart, also observed that current trading was behind expectations. He pointed out that the company had said that first-quarter revenue was 5 percent ahead of the December figure, but that the quarter was still 10 percent down on the previous quarter as a whole.
“This raises some questions over B2C [business-to-consumer] trading, although we are comfortable with our 6 percent year-on-year revenue growth target.” Like Jefferies, Hollins suggested this would be assisted by B2B growth.
Source: http://www.gamblingcompliance.com/
The note from investment bank Jefferies&Co downgraded the stock and said that until there were stronger signs of the business-to-business (B2B) operation delivering the promised new players and added growth, the shares were fairly valued at around 105p.
The shares ended Thursday down over 6 percent or 6.25p at 95.5p.
The note pointed out that underlying levels of trading at 888 were soft. “There has been an improvement since December’s nadir, but the core casino channel continues to be challenged and the first quarter is expected to be down on the fourth quarter overall,” said William Birch and Anna Barnfather at Jefferies
“With currency moves and lower gameplay impacting in the fourth quarter, this is already a soft comparison while the summer months are seasonally weaker: this all points to a lower run rate for the year than currently expected.”
The Jefferies team noted approvingly that the B2B operation – rebranded this week as Dragonfish – was a “credible” platform with a promising pipeline of partners.
The company this week announced a deal to provide a casino and poker offering for the Racing Post’s readership. Gigi Levy, chief executive at 888, said the firm was talking to 50 possible B2B partners, and was hoping that for this current year the division would contribute 50 percent of pre-tax profits.
But, as Jefferies noted, the B2B operation has yet to replace the growth that was coming from the consumer side. “We hope to see an early conversion of many of these potential partnerships, including some sizeable additions on the scale of the Sportech deal or bigger, but do not expect material uplift before the fourth quarter at the earliest.”
James Hollins, analyst at Daniel Stewart, also observed that current trading was behind expectations. He pointed out that the company had said that first-quarter revenue was 5 percent ahead of the December figure, but that the quarter was still 10 percent down on the previous quarter as a whole.
“This raises some questions over B2C [business-to-consumer] trading, although we are comfortable with our 6 percent year-on-year revenue growth target.” Like Jefferies, Hollins suggested this would be assisted by B2B growth.
Source: http://www.gamblingcompliance.com/
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