PartyGaming Future Bright – HSBC
From: eGamingReview
Analysts at HSBC slapped a price target of 122p on the shares of PartyGaming, saying they saw potential upside of 30% on the share price at levels of 94p.
In a research note initiating coverage with an ‘Overweight’ rating, HSBC – the house broker for 888 Holdings – noted that although the PartyGaming share price has retraced from its July high of 179p, the fall has been overdone.
“We expect continued growth from its current core market [US], benefits from the data mining project started this year and new game offerings will drive top-line growth,” wrote Richard Wainwright, analyst for HSBC.
PartyGaming has been under a cloud since the company issued its interims in September when comments about the future growth prospects triggered a 30% fall in the share price. But Wainwright noted the fears regarding the strength of the poker market have not been borne out by the third-quarter key performance indicators (KPIs) from either PartyGaming or 888.
“PartyGaming’s de-rating has nevertheless had a significant impact on the sector… As a result, we believe the online gaming sector is now relatively undervalued versus its growth rates.”
However, Wainwright says that the sector will need to see a longer series of good KPI numbers and financial performances over a period of 12 months for confidence in the sector to return. Noting the recent US$14.5m PartyGaming deal to acquire MultiPoker, Wainwright added he expected consolidation within the egaming sector to increase and that PartyGaming is likely to be a “key consolidator” within the space.
Meanwhile, the performance of the Empire Online share price this week suggests that many in the City of London are betting against PartyGaming making a substantial offer for the business. At one point on 18 November, the Empire share price slumped to 58.5p, giving it a market cap valuation of around £180m.
PartyGaming owns and operates Party Poker and Party Bingo.
