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“The FTSE 100 enjoys another healthy rise on Wednesday morning as results from Apple surprised on the upside overnight,” says AJ Bell Investment Director Russ Mould.
Paddy Power Betfair
“News of a £500m capital return to shareholders is not enough to save bookmaker Paddy Power Betfair from a bashing by the market this morning as it reports a weak first quarter.
“A 6% year-on-year decline in earnings for the first three months of the year is largely being attributed to new betting taxes and start-up costs in the US as well as a run of gambler friendly sporting results and cancellations of racing fixtures due to poor weather.
“This means that even to hit its underwhelming guidance for anywhere between a slight decline or a 5% increase in earnings for 2018 as a whole it will need to see a material improvement in trading.
“Several factors, including harsher regulation and spiralling marketing costs could get in the way of the company achieving this.”
Sage
“A torrid start to 2018 is prompting an overhaul of middle-management at accounting software firm Sage alongside first half results.
“A modestly positive market reaction reflects relief that the company is addressing its problems and also that guidance has not been reduced further since last month’s downgrades.
“In order to hit the 7% full year growth target, Sage will need to improve on the 6.4% it posted in the first half. The company has run into problems as it attempts to convert its small business customers to subscription-based services to improve revenue visibility.
“This is a laudable aim, but the disappointing outcome shows the risk of a company shifting its sales strategy, something which relies on flawless execution.”
Ocado
“The UK groceries sector looks set to become even more competitive, with the proposed combination of Sainsbury’s and Asda in line to create a new dominant player. Now is probably a good time then for online outfit Ocado to remind the market of its increasingly international horizons.
“The company has lined up its fourth overseas deal, providing end-to-end online solutions for Swedish supermarket ICA through its Ocado Smart Platform or OSP.
“Ocado’s valuation remains loss-making but trades on around 200 times forecast earnings for the November 2020 financial year. It is being supported by a belief it can scale up OSP with limited capital investment and thereby provide significant growth into the future.”
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