FTSE 250 gaming giant
Through organic growth and strategic acquisitions, Playtech has grown to be one of the largest online gaming software suppliers in the world. It has lucrative and high-profile license agreements with names such as Warner Bros, Ladbrokes, and William Hill to mention a few. In addition to its B2B arm, it also possesses a substantial footprint in the B2C retail arena as well.
At the time of writing, shares in Playtech are trading for 378p per share. This time last year shares were trading for 27% less at 296p per share. In 2021 to date, Playtech’s share price is actually down approximately 5%. I am not concerned by this and this has mainly been caused by results announced for the pandemic period and anticipation of normality resuming.
Trading update and performance
The update released to the market today confirmed trading was inline with expectations. Playtech pointed to better than anticipated results in B2B which offset some shortcomings in its B2C. Due to the pandemic, different parts of the world have been under different restrictions so its B2C retail outlets may have opened at different times. Online performance was strong.
Full-year results earlier in the year were affected by Covid-19. This was largely due to the cancellation of sporting events. The positive news from the FY results was that its digital segment grew approximately 30%.
Risk and reward
Like all FTSE 250 stocks, Playtech has risks, including two primary risks that concern me the most. Firstly, it operates in a very highly regulated industry. If these regulations were to change and hinder Playtech, it could affect operations and more importantly its financials.
The second risk with Playtech is that the pandemic is not over. As a global organisation there are different implications for it in different parts of the world. If restrictions come back into force both parts of its B2B and B2C arm can be affected. In addition, sporting events are still at the mercy of the pandemic. These events boost Playtech when they are happening.
Overall I do like Playtech and I would consider it for my portfolio. This trading update has confirmed that it is able to turn around the fortunes of its B2B blip it experienced as reported in full-year results. More importantly, it has a great position in a multi-billion dollar industry. As not only a provider of software but an operator of its own brands, it can position itself to thrive and has been doing so in the past.
Analysts believe that Playtechs annual earnings for 2021 will improve by close to 70%. In addition to that, in October of last year, insiders were buying shares. This is always a good sign for me. If those working for Playtech are happy to invest their cash then I feel confident too.
Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.