Analysts take a brighter view of Party Gaming

Analysts at HSBC this week took a brighter view of poker giant Party Gaming, lifting the share price target to 122 p and revealing that there is a strong potential upside of 30 percent on the share price at the 94p level.

Analysts noted that although the PartyGaming (owner of Party Poker)share price has retreated considerable from its July high of 179p, the fall has been overdone and some adjustment can be expected.

"We expect continued growth from its current core market, benefits from the data mining project started this year and new game offerings will drive top-line growth," wrote Richard Wainwright, analyst for HSBC.

The pessimistic comments by the Party Gaming CEO when the September interims were released are widely believed to have triggered the 30 percent fall in the share price that followed. But Wainwright noted the fears regarding the strength of the poker market have not been supported by the third-quarter key performance indicators (KPIs) from either PartyGaming, Sportingbet 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," Wainwright opined. The analyst also commented on the recent deals to acquire former skins, saying that consolidation within the i-gaming industry would probably increase.

The question on many broker and investor lips this week was whether Party Gaming will press ahead with its previously announced negotiations to acquire former skin Empire Online. The latter's share price has taken a hammering over the past few days, driving it down to a market capitalisation of only GBP 180 million. Rumours are rife that the deal may be off, inducing more uncertainty and caution among investors.