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Why CMC Markets’ recent profit warning could actually be good news for the spreadbettor

Among a handful of other issues, CMC said its customers were winning too much, but City broker Liberum thinks that bodes well for longer-term revenue prospects

The theory goes that not all clients will withdraw their winnings, instead choosing to bet with them further down the line

City broker Liberum reckons CMC Markets Plc’s (LON:CMCX) recent profit warning could actually be good news for the spreadbettor.

New regulations designed to limit punters’ losses were brought in at the end of last summer, while CMC bosses also bemoaned an “exceptionally strong client performance” of late.

In short, customers are winning too much money and not losing enough.

READ: CMC profit warning in full

“Depending on the trading conditions in the remainder of the quarter, CMC now expects CFD and spreadbet revenue to be between c. 25% and c. 35% lower year-on-year, compared to previous guidance for a c. 20% reduction year-on-year,” read Friday’s update.

Shares tanked on the back of that news, losing more than a fifth of their value.

But analysts at Liberum think the recent uptick in client wins bodes well for revenue generation further down the line.

“If a customer wins, that does not mean that the profit and loss gains have necessarily been withdrawn,” it said in a note to clients.

“Over time, it's the spreads on the leveraged notional that generates the revenue for the platforms. Gross wins in the short term are propitious for spreads revenue in the medium term.”

CMC shares fell another 0.4% to 89.7p. Last summer they were changing hands for more than 200p.

Quick facts: CMC Markets PLC

Price: 328 GBX

Market: LSE
Market Cap: £948.31 m

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