Euro Companies to Benefit from U.S. Online Poker Regulation

Analyst Daniel Stewart & Co. has said PartyGaming shares could reach 500p during 2010, from the current 252p, with potential upside coming in the form of legislative, trading, consolidation and external catalysts.

The investment note released by the company said, “PartyGaming’s embedded value is underpinned by a leading poker brand and network, as well as a sizeable and improving casino product and sports/bingo capabilities. This limits downside stock risk.

“We are increasing our price target by 33 percent from 254p to 339p and move our recommendation from Hold to Buy.

“The key area of potential upside is the U.S. PartyGaming touched a valuation of $12 billion during its U.S. heyday, with expected group EBITDA in FY06 of $750m. This was prior to the frighteningly negative impact of the introduction of the UIGEA on 13 October 2006.

“While we would not contest that PartyGaming has the opportunity to regain such a formidable US-facing online poker market share (>50% back in 2006) on re-entry into the market, we believe that it can drive material profit upside from a legalised opening up of the US market."

In April the company settled with the U.S. Department of Justice for $105 million, a move widely seen as paving the way for future re-entry to the U.S. market.

Elsewhere Goldman Sachs has said it believes the hardline stance taken by the U.S. over online gambling including poker is likely to change and predicts the market for online poker and casino is worth up to $12 billion.

“We believe it is logical to assume that the US market will eventually regulate – given the potential implications for US tax take, if nothing else,” the company said in an investment note earlier this week.

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