Pending legislation in the UK could weigh on betting services giant Paddy Power-Betfair’s stock performance, analysts have warned.
The group’s share price was down nearly 4% yesterday despite a positive first- quarter trading update which showed a 23% rise in total revenue to £416m (€492m) and an 87% rise in underlying earnings to £111m. Underlying operating profits more than doubled to £91m and retail revenue was £3m ahead of forecast.
Merrion Stockbrokers currently has a ‘hold’ sticker on the Paddy Power stock and analyst Darren McKinley issued a note of caution yesterday, despite saying the continued move to digital and mobile coupled with a strong management team equal a “recipe for continued success”.
“However, the uncertainty surrounding upcoming regulatory announcements specifically relating to the UK government’s review of gaming machines and social responsibility makes us reluctant to upgrade our recommendation,” he said.
Davy said that lower-than-expected online staking trends and a competitive UK market were additional concerns.
While it said it sees “excellent scope” for Paddy Power-Betfair to deliver earnings upgrades over time it said it was unlikely to make material changes to its overall existing forecasts at this point.
Paddy Power said that it benefited in the first quarter from a good Cheltenham, but that had been balanced out by other results — including the Aintree Grand National, the US Masters golf and Premier League football — going the way of the consumer.
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