Stock of the day 20/11/2015 – Betfair Group PLC

It’s been a year of big winnings for Betfair, even before it announced a sector-changing tie-up with Paddy Power.

Can its all-time high hitting run continue with its half year interim results next Wednesday?

After opening 2015 at £15.55 things got off to a quietly positive start, with Betfair tickling the £18 mark by the start of March. Raised full year profit forecasts then helped push the stock above £20 for the first time and, with a little help from the Tory election victory, the stock hit £27 by the start of June.


(Source: IT-Finance.com 20/11/2015)

Betfair’s explosive growth came to an end, a least for a bit, as June got underway, with an update from Numis Securities that claimed the company’s share price had ‘got ahead of itself’ dragging it below £24. Even a stellar set of full year figures, including a 70% increase in its dividend to 34p per share, a 21% rise in revenue to £476.5 million and a 55% jump in pre-tax profits to £94.8 million, couldn’t stall Betfair’s minor-decline with investors indulging in a wave of profit-taking.

However, as mentioned, this supressed trading didn’t last for long, and by July the stock had resumed its climb, crossed the £28 mark in August. The well-documented Chinese issues of that month did take their toll on Betfair, sending the stock back to £25; however, news on the 26th August, the date of the company’s Q1 interim management statement, that Paddy Power and Betfair had were discussing £5 billion merger sent the stock stratospheric, jumping nearly 25% in 2 days, hitting £32 in the process.

The confirmation of the tie-up at the start of September did cause a brief fall back to £30, before Betfair’s bombastic trading resumed, touching £34 by the start of October. The sale of 8 million shares in early October then left the stock around £32 for the rest of that month and the start of November, before its latest surge saw it hit a current trading price, and all-time high, of £34.93 (IT-Finance.com, 20/11/2015).

Given just how high Betfair’s stock is at the moment, it may have to post some very strong figures next Wednesday to ensure it doesn’t see a brief dip in form. Investors will also be keen to hear an update on the progress of the Paddy Power merger, with its soon-to-be partner stating that details of the deal would arrive in the next few weeks.

Betfair Group PLC has a consensus rating of ‘Hold’ with an average target price of £27.88.