888 Holdings PLC (LON:888) has been upgraded to ‘buy’ from ‘hold’ by analysts at Deutsche Bank, who said the gambling firm had a “particularly strong balance sheet” and net cash to help support itself during the coronavirus pandemic.
In a note on Monday, the bank also cut its target price for the group to 153p from 175p, although added that the company had “no retail exposure” and very little exposure to the sports betting market, both of which have been hit particularly hard by global lockdown measures.
Deutsche added that while attention will be focused on 888’s dividend when it releases its delayed 2019 results this week, it was “testament to the relative strength of 888's positioning that there should be any debate over dividends, given dividend suspensions have already been announced at Flutter, Playtech, William Hill and Kindred”.
Deutsche said two of Playtech's top three markets, China and Italy, have been “at the heart” of the coronavirus outbreak, adding that its broader sports and retail operations had also been hit hard by “a combination of enforced retail closures and sporting cancellations”.
The bank also said there was a “definite risk” to the company’s Live Casino business, and while it studios in Latvia were still operating the country has introduced emergency lockdowns and the company has already closed down in the Philippines.
Similar assessment from JP Morgan
Meanwhile, analysts at JP Morgan said 888 was their “most preferred name while the pandemic duration remains uncertain” and reiterated their ‘overweight’ rating while cutting their price target to 180p from 220p.
“888 has the least direct exposure to [coronavirus], with 16%/0% sports/retail revenue exposure”, JP Morgan said, adding that while sport cross-sell to casino has diminished, this was offset by increased activity from casino-only customers.
Meanwhile, the bank downgraded Playtech to ‘neutral’ from ‘overweight’ and cut its target price to 335p from 548p, saying the pandemic impact coupled with “overhang from Asia” meant there were “additive risks” and they were “no longer comfortable being [overweight] at this juncture, despite significant share price upside in a benign scenario”.
Shares in 888 jumped 11.1% to 123.3p in mid-morning trading, while Playtech fell 6.6% to 165.6p.
--Adds JP Morgan changes and updates share price--