Could FTSE 250 incumbent 888 Holdings (LSE:888) be worth investing in for my portfolio? Let’s take a look to see if I should buy shares.
FTSE 250 gaming giant
888 Holdings is one of the world’s largest online betting and gaming firms. It operates via two channels. The first is B2C, which includes its own brands such as 888 Sport, 888 Poker, and 888Bingo to name a few. These platforms offer the public the opportunity to play casino games and place bets on sporting events. The second channel is the B2B aspect of the firm. This is where it produces proprietary technology for partners to use through its Dragonfish brand.
As I write, shares are trading for 360p. A year ago, shares were trading for 252p, which is an impressive return of 42%. Shares in 888 are currently trading close to all-time highs and have surpassed pre-crash levels of close to 140p by some distance.
The pandemic left many people looking for new pastimes and habits. Online gaming was one thing many turned to which benefited firms like 888. So should I look to add shares in this burgeoning firm?
For and against
FOR: 888 has a good historic track record of performance. I understand historic performance is not a guarantee of the future but I use it as a gauge when reviewing investment viability. I can see revenue has increased year on year for the past three years and gross profit for the past two years. The FTSE 250 incumbent’s Q3 trading was excellent too, looking at more recent information. Revenue rose by 7% compared to the same period last year. Year-to-date revenue stands 28% higher compared to year-to-date levels in 2020.
AGAINST: The issue with online gaming and betting is the ever-looming threat of tighter and increased regulation. In fact, 888 has been affected by this in the past. Dutch authorities introduced new regulation that required a betting license. 888 decided to remove itself from the Dutch market but will look to relaunch. This is an ongoing threat that can affect firms like 888.
FOR: One thing I really like about 888 is the fact it is growing rapidly. It does this organically and through acquisitions. For example, in its Q3 update, it confirmed the acquisition of William Hill International. It also launched a new brand in Colorado and 888sport in Germany. All of this activity is exciting and shows growth plans and ambition. This growth could result in increased shareholder returns in the future.
AGAINST: 888 shares are trading close to all-time highs. In fact, they have never come close to recent levels. This is a bit of a worry for a potential investor. Any negative news or downturn in earnings, that could occur if pent up demand and new users fade away post-pandemic, could hurt the share price and any potential returns.
My verdict
Right now I would be willing to add 888 shares to my portfolio. I am excited by its growth trajectory and the fact the market seems to be growing overall and has a robust balance sheet to support it. New customers since the pandemic have benefitted 888 and I believe this new wave of users is here to stay.