The world situation right now, with a Chinese economy that has slowed down and the tensions in Ukraine, has taken a big hit on the stock prices of many online bookies including William Hill and Ladbrokes.
Last week the taxes on fixed odds betting were increased from 20% to 25%, which means lower profits for the bookies and thus lower stock prices. Furthermore the bookies lost around £20 million this weekend, as all the favourites won their respective matches more or less. This has made Barclays analysts to cut the prices of William Hill shares by 7.7% to 331.4p and Ladbrokes shares 2% to 129p.
"While we believe William Hill is well placed to gain market share and outperform on a 3- to 5-year view, we expect the regulatory risk surrounding machines to weigh on the shares in the near term. We cut our William Hill price target to 370p (from 393p) and reiterate our equal weight rating.
[On Ladbrokes], with just 15% of earnings before interest and tax coming from the online division in 2015, versus William Hill's more than 50%, the downside for Ladbrokes from any negative machine regulation has around twice the magnitude. We note that with estimated dividend cover in 2015 of just 1.1 times (versus 2 times in 2012), the dividend appears very much at risk. We cut our price target to 117p (from 128p) and reiterate our underweight rating." Barclays said to The Guardian.