Gaming software developer Playtech has experienced strong growth in its business-to-consumer (B2C) and business-to-business (B2B) sectors.
Playtech’s Italian unit, Snaitech, continued to grow thanks to new customers gained in the pandemic.
In addition, opportunities are emerging in the North American market for Playtech’s B2B gaming software as regulations are relaxed. The company is now licensed in nine states.
Before we say whether it is a good alternative to invest in Playtech, let’s analyze: the concern with these kinds of gambling companies is that as the economy weakens, people will gamble less.
However, so far, there are no signs of a slowdown. None at all.
Last year, business-to-consumer (B2C) gaming revenues rose 48 percent to €983 million.
In part, this is because the pandemic effect in 2021 delivered some unexpected customers. But even then, Playtech’s B2C arm, Italy’s Snaitech, continued to grow in the second half of the year.
But while Italian players underpinned Playtech’s B2C business, it is the North American market that brings the promise of growth.
Playtech sells business-to-business (B2B) gaming software, and as regulations loosen in the U.S., more and more opportunities are opening up. Also, since this software is licensed, Playtech does not have to worry about a downturn in the gaming market. Companies must pay the same way.
Playtech and investment opportunities
Last year, Playtech’s B2B revenue rose 14 percent to €631 million, while adjusted cash profit rose 15 percent to €161 million.
At the beginning of this year, it had licenses granted in the states of Ohio and Maryland and is now licensed in nine more districts.
Management is targeting a medium-term B2B adjusted cash profit of €200 million to €255 million. More than interesting.
Combining this B2B target with Snaitech’s target of €300 million to €350 million cash profit gives a total of €520 million to €620 million.
This is well above Peel Hunt ‘s 2027 forecast of €520 million. In the shorter term, the broker forecasts a cash profit of €460 million for 2024 and an adjusted EPS of 66.8, giving a price-to-earnings ratio for 2024 of just 9.4.
The slowdown in B2C gaming could come (anything is possible), but with the potential B2B growth on offer in the U.S., the current share price looks more than affordable. If so, there’s buying to be done.
Playtech and its rivals
Playtech plc is a specialist gambling software development company founded in 1999.
The company offers software for online casinos, online poker rooms, online bingo games and business betting, among others.
Other major players in the online casino software market include Microgaming, NetEnt and Evolution Gaming. While not the focus of this article, there are potentially good companies to invest in there.
These companies offer a wide range of products and services, from slot games to live dealer tables. All are known for their high quality graphics, new features and simple interfaces.
The online casino software market has experienced significant growth driven, in part, by the rise of mobile gaming.
According to a report by ResearchAndMarkets.com, the global online gambling market is expected to reach $127.4 billion by 2027, with a compound annual growth rate of 11.8 percent between 2023 and 2027.
One of the key factors driving the growth of the online casino software business is the shift toward regulated markets.
Many countries around the world are now legalizing online gambling and introducing new regulations to ensure player safety and fair play (several U.S. states are moving in this direction).
This has created new opportunities for companies like Playtech.
Playtech’s other businesses
In addition to providing online casino software, Playtech also offers a range of other products and services to help operators run their businesses more effectively.
These include customer management systems, payment solutions and marketing tools, as well as consulting and training services.
Despite the growth potential of the online casino software market, there are also some challenges facing companies in the industry.
One of the main concerns is the potential for increased regulation and restrictions on online gambling, which could limit growth opportunities and increase costs for operators.
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