Bwin.party Digital Entertainment Plc : Bearish bets
By Maxime Nonglaton
Entry price | Target | Stop-loss | Potential |
---|---|---|---|
GBX 115.5 | GBX 0 | GBX 126 | +100% |
At the end of May, the group announced its strategy for tackling the fast-growing USD 8.2 billion social gaming market : the purchase for up to USD 23 millions in cash of a number of assets from Velasco Services Inc. and Orneon Limited. There is no information available about the profitability of the two businesses. Furthermore, this industry evolves rapidly : success is not easy to achieve and regulation remains unclear. It is very competitive because of the market growth which is favorable to new entrants.
Even if the company has a lot of cash, it is overvalued : BPTY’s PER for 2012 is 28.1x and 16.8x for 2013 and growth rates are low. Revenues from Euro 2012 and the Olympic Games are already priced. Analysts decrease their EPS and revenue revisions for a year. 2011 was an awful year and the company disappointed estimates. Surperformance rating confirms the ugly fundamentals.
Technically, BPTY is under every decreasing moving average (daily and weekly data). In 2011, there was a double bottom on the GBp 102.8 support. Due to the downtrend, the security is likely to test again this support. In the short term and the mid-term, the trend is bearish.
Due to graphical analysis, investors can sell the stock immediately. The target price is the GBp 102.8 support. To avoid important losses, a stop loss will be fixed in the 20-days moving average area, at GBp 126.