Shares in PartyGaming nosedived by over 30% and other egaming stocks
fell sharply on Tuesday, following the firm’s warning over a slow-down
in the poker market.
Shares in PartyGaming nosedived by over 30% and other egaming stocks
fell sharply on Tuesday, following the firm’s warning over a slow-down
in the poker market.
Party published its half-yearly results with operating profits up 70%
to US$237.7m (£128.9m), but said year-end 2005 revenues would be lower
than expected.
"Group revenues are expected to continue to show good year-on-year
growth, although at rates lower than the substantial rates previously
experienced," the firm added in a statement.
And the first tangible evidence of the widely expected slowdown in growth caused nervous investors to bail out.
The resulting fall wiped almost US$4bn off the value of the firm and
had a knock-on effect on other egaming firms, with Sportingbet and
Empire Online both seeing falls of 15%.
Most industry experts predict the online poker sector will experience
growth of around 60% this year, well below last year’s 150%+ growth.
But the expected slowdown appears to be hitting PartyGaming harder than
predicted, and the market reacted badly to the reassessment of the
poker sector.
At close of business on 6 September, Party’s share price finished below
its listing price for the first time at 105p, and analysts warned it
may take some time to recover fully. At the time of writing (7
September), it had recovered slightly to 109p.
“This has been an emotional shock for the market, and it may take a
strong positive news flow to correct the situation,” Paul Leyland,
leisure analyst at Seymour Pierce, said.
But he, along with other analysts, played down the significance of the
Party announcement to the long-term ambitions of the poker sector.
“It’s a fairly sensible correction of a lot of the hype that surrounded
the sector, but it’s at the wrong time for the wrong reason,” Leyland
said.
Some industry commentators pointed to the significance of Party’s
dependence on the US market, which has become increasingly competitive
in 2005.
Firms with a strong European focus, such as Betfair, William Hill and
Ladbrokes, have seen strong growth in poker revenues in the first half
of the year.
Party said its revenue growth in the US year on year was 77% compared with 2004, while outside the US it was 110%.
But there were signs of a diminishing US focus, with the proportion of
real money sign-ups coming from outside the US increasing from 10% to
19%.
from egrmagazine.com
