Playtech stock rating cut to neutral by Redburn-Atlantic

On Tuesday, Redburn-Atlantic revised its stance on Playtech (LON:PTEC) Plc. (PTECH:LN) (OTC: PYTCY), a $1.36 billion gaming technology company, downgrading the stock from Buy to Neutral and setting a price target of GBP 4.00. The firm’s analyst, Andrew Tam, provided insights into the decision, noting the company’s recent strategic moves. According to InvestingPro data, the stock has delivered an impressive 118% return over the past year.

Playtech has recently undergone significant changes, including the sale of its Snai brand to Flutter and the issuance of a special dividend. These actions have shifted Playtech’s focus, turning it into a purely B2B (business-to-business) supplier. The company maintains a healthy financial position with a "Good" InvestingPro Financial Health score of 2.75 and a comfortable current ratio of 1.63. As a result of these transformations, a substantial portion of Playtech’s value is now tied to its minority stake in Caliplay, which is considered illiquid.

Tam acknowledges that while Playtech still has potential for further value creation, the most accessible opportunities for growth have already been utilized. This assessment comes after Playtech’s shares have seen a significant increase, returning over 56% since Redburn-Atlantic’s initial coverage in 2023.

The analyst’s commentary underlines the shift in Playtech’s business dynamics and potential impact on its stock performance. The new price target of 400p reflects Redburn-Atlantic’s adjusted expectations for the company’s future market position.

Investors and market watchers will be monitoring Playtech’s performance closely, as the company navigates its new role as a pure-play B2B supplier and manages its stake in Caliplay. The downgraded rating and new price target suggest a more cautious outlook for the stock after a period of robust returns.

In other recent news, Playtech announced the completion of its €2.3 billion sale of Snaitech, which included a special dividend of €1.8 billion, or €5.73 per share. This payout represented a significant portion of Playtech’s market capitalization. Additionally, the company confirmed the redemption of the remaining €150 million of its €350 million senior secured notes due in March 2026. Following these developments, Deutsche Bank (ETR:DBKGn) adjusted its price target for Playtech to GBP4.17, down from GBP9.03, while maintaining a Buy rating on the shares. The adjustment reflects the subtraction of the special dividend amount from the previous target. Analyst Simon Davies from Deutsche Bank noted that Playtech’s shares are trading at an adjusted 6x FY25E EV/EBITDA, which he considers undervalued. Playtech’s strategic focus on regulated markets and its growth trajectory support Deutsche Bank’s continued positive outlook on the stock. These developments are part of Playtech’s broader strategic direction to achieve a medium-term EBITDA target of €250-300 million.

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