The Future Looks Bright for PartyGaming

2007 February 09, Jonny Vincent

PartyGaming will release its annual trading report on the 1st of March, and there is growing speculation that the online gambling giant will have some glowing news to report to shareholders.

The future looked very bleak for PartyGaming only months ago when the Unlawful Internet Gambling Enforcement Ace (UIGEA) was signed into law. PartyGaming subsequently withdrew from the US market. As US players accounted for a large percentage of the company's business, most of the paper value of the company was wiped out almost overnight. PartyGaming was trading at 111p on 20th August, 2006 and has reached lows of almost 25p twice since then.

But PartyGaming has been quietly building up to a revival. Following its withdrawal from the US, player numbers at their flagship online poker site Party Poker were almost halved. Their peak player numbers dropped from 13,000 to 6,000. However, PartyGaming has since focused their marketing into Europe, and recent peak player numbers have been well over the 10,000 mark. This is a 65% increase from November, leading to some analysts stating that PartyGaming is under-valued. Broker Dresdner Kleinwort provided clients with a bullish update overnight.

Shareholders can't be faulted for being wary of online gambling stocks in the current environment however. The past six months have been nothing short of ruthless for the online gambling industry. However, in recent weeks there have been some positive developments – there is a chance the European Commission will challenge the validity of the UIGEA with the World Trade Organization. This news triggered a share price revival, with PartyGaming shares bouncing up 10% that day.

PartyGaming shares had been steadily climbing in recent months as their player numbers grew, but they received a battering when the NETeller founders were arrested and NETeller subsequently withdrew quickly from the US market. The US Department of Justice then issued subpoenas to major investment banks to gather 'evidence' of their dealings with PartyGaming.

It was one hit after another for the beleaguered online gambling giant, but it now looks as though the company has weathered the storm and the future looks increasingly bright. Many European nations are moving towards regulated online gambling, and the entire Asian market also beckons.

With player numbers continuing to rise, PartyGaming looks set to regain its place at the top of the food chain. Its annual report on the first of March will likely contain a lot of pleasant news for PartyGaming shareholders.

PartyGaming is currently trading at 31p (5am EST, 02/08/07).