Paddy Power shares down 8pc as analyst cuts its rating
Shares in bookmaker Paddy Power Plc fell almost 8pc after Merrion Capital cut its rating from buy to reduce.
The 'reduce' or sell rating comes on the back of what Merrion believe will be a reduction in the amount staked on the average bet, though it admits it does not know how the recession will impact the bookies' online business.
But there was better news from Standard Life fund manager Harry Nimmo, who manages the Standard Life UK Smaller Companies Fund. Standard Life expects smaller retailers to lead an upturn in the UK stock market later this year.
He is also a fan of Paddy Power, liking the company's online business model. The bookmaker is one of his top 10 picks for the year.
Earnings
Merrion analyst Gavin Kelleher said he is reducing gross earnings forecasts for the group by 17.8pc to €46.9m for the current financial year, while adjusted earnings are down 16.5pc in his new note on the bookie.
"The key driver for our downgrade is our assumption that gambling spend by customers in both its online and retail channels is likely to come under greater pressure in the weakening consumer environment, particularly in Ireland," he said.
"The economic weakness, along with the Irish betting tax change announced in November, will have a significant impact on the profitability of the group's Irish retail estate," he adds.
"There is no historical evidence to estimate the impact a recessionary environment will have on online betting. However, the key performance indicator likely to come under the most pressure is average stake per bet in its sports betting division," the Merrion analyst said.
- Pat Boyle
