Gambling Companies / William Hill and Ocado

“Is today the day that the FTSE 100 achieves a new record high at the market close? It is up 12 points to 7,746 on Thursday and only needs another 33 points to smash the all-time high achieved in January,” says AJ Bell Investment Director Russ Mould.

Gambling Companies / William Hill

“Confirmation that the maximum stakes for fixed odds betting terminals will be reduced from £100 to £2 could trigger a dramatic change to the number of betting shops on the high street and also places more pressure on betting firms to have greater online scale.

“For example, William Hill says approximately 900 of its stores could become loss-making so a chunk of these sites are likely to be closed.

“The next issue to consider with the sector is the potential for the UK Government to increase taxes for online betting in order to recoup money it used to get from gambling machines.

“That would represent a double blow for companies with high street and online betting operations as both events would take a big bite out of earnings.

“It’s amazing to think shares in gambling companies were racing ahead at the start of the week thanks to potential changes in the US market regarding sports betting. Reality has quickly come back to haunt them and it is back to crisis management mode as companies work out how they are going to protect their earnings as much as possible.

“Amid this period of turmoil, William Hill is certainly looking vulnerable to a takeover bid, particularly as it already has a foothold in the US.”

Ocado

“A US licensing deal helps extend the astonishing momentum displayed by internet-based groceries business Ocado since the company shifted its focus from being a simple online supermarket to a technology platform provider.

“A significant milestone in this strategy was marked in November last year when the company announced its first overseas deal with France’s Groupe Casino supermarket brand – providing the company with the necessary kit and technology to launch its own online offering. Since then the shares are up by more than 150%.

“Another leg up in the share price today reflects market excitement about the size of the opportunity across the Atlantic. However, the tie-up with US chain Kroger is not expected to be immediately earnings enhancing, so the company will remain loss-making for the time being.

“For now, at least, the market appears willing to pay up in the hope and expectation of growth in the future and not worry too much about when all these new ventures will become profitable.”

These articles are for information purposes only and are not a personal recommendation or advice.