Online Gambling Stocks Soaring Again, Experts Say

and the passage of a bill in the U.S. House of Representatives that would essentially ban Internet gaming in the U.S.
 
 According Gregory Harris, an analyst for Canaccord Adams, a London-based investment bank, investors are viewing the recent actions in the U.S. by the government as nothing more than election year grandstanding.
 
“You can throw a lot of things to scare them, but there are still guys finding value," Harris said. What’s more, many investors are now more bullish than ever on online casinos.  “Panicked overselling has made some Internet gambling stocks cheap now,” said Harris. 

Ratings Boost

According to Nielsen Net/Ratings, PartyPoker.com recently has been among the world's 10 fastest-growing Web sites, with its traffic up 185 percent in July from the previous year.
 
Hedge funds have led a comeback in gaming shares. Shares of SportingBet.com hit $7.50 on July 4. On July 18, after the indictment, they fell dramatically, in heavy volume, reaching a low of 171 pence on July 21, or pennies on the dollar.
 
The stock has, however, made a quick comeback and is now at 249.25 pence – about where it was before the arrest of David Carruthers. Meantime, shares of PartyGaming.com also dipped in mid-July on heavy volume, hitting a low of 85.25 pence three weeks ago. But the share price has performed well, and reached a high of 120 pence on Aug. 4, an analyst said.
 
A company many online gamblers rely on for payment processing, Neteller.com was at 597.50 pence on July 4, fell to 319 on July 20, and is now at more than 400 pence.
Earnings reports are fueling the frenzy. A firm called SportingBet.com said on Aug. 1 that it was on track to report $195 million in operating profit for the fiscal year that ended July 31, whilst PartyGaming.com’s second-quarter revenue was up 49 percent from a year ago, to $319.3 million. 
 

Potential Profits

 The investment remains risky, but potentially hugely profitable, said Sebastian Sinclair, a gaming analyst with Christiansen Capital Advisors, based in New York City.
Sinclair said it is highly unlikely that the U.S. Justice Department will succeed in shutting down another Web gambling company.
 
A spokesman for BetOnSports.com said it now plans to focus on taking bets from Asian gamblers.
 
 Long-term investors, like pension and mutual funds, and hedge funds that go in and out of the sector, are powering demand for online gaming shares. For example, Morgan Stanley Securities, a British division of the New York investment bank, holds around 2.7 million shares, experts said.

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