The rest of this decade is going to be fascinating for 888 and its shareholders. I expect the next two to three years to be rough for the gambling industry and most industries for that matter, with 888 being no exception. Populist politics, trade wars, taxes etc. are going to take a toll on all companies and all portfolios. The question is who is best equipped to deal with the tough times ahead.
The background: Cheap populists replete with tough talk and really bad finances keep being elected around the western world, last weekend in Italy. Some are starting ill-advised trade wars, and others are upset that those in charge of their wallets aren’t allowing them to spend even more money they don’t have. And in the meantime, the purse managers in Brussels are gearing up for an end to the largest money-printing programs the world has ever known.
While this isn’t exactly the 1930’s and I don’t think World War II.5 is about to break out, capital growth is going to be hard to come by for the rest of the decade. Companies may start being forced to deleverage quickly. That’s where things get interesting for 888.
888 has earnings coming up in two weeks, and while no fireworks are expected, if shares edge up on the report it wouldn’t be surprising. 888 hasn’t been about fireworks ever since exiting the US. Since bottoming in 2011, it’s been a slow-burn company, if surging from 30 to nearly 300 pence in 5 years can be considered “slow-burn”. Even using such terms to describe 1000% capital growth in 5 years illustrates how deep of a boom we are still in. Within the last year though, 888 stock has underperformed some of its peers including The Stars Group, and Ladbrokes Coral Group, and has started to plateau. It may be a while – a year or two perhaps – before 888 pushes through to a new and higher trading range, but in the mean time a straight up dividend reinvestment strategy should do very well for shareholders.