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PartyGaming Stock Drops Even As Profits Rise
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PartyGaming's eagerly awaited first set of results post-IPO were glittering and impressive. The operators of PartyPoker.com announced that profits were up by 21% for the first six months of 2005. Yet, the market reacted by selling the stock in droves, and within hours the share shed one-third of its value in heavy trading.
The reason for the dramatic slump was investors' concern over the future sustainability of these good results. Those concerns stemmed from a comment from PartyGaming that growth for the remainder of the year would occur "…at rates lower than the substantial rates previously experienced." That set the cat among the pigeons and no-one wanted to hold onto the stock a moment longer than necessary.
There are two possible factors as to why there is likely to be a decrease in profits for the rest of the year. First and foremost, ESPN's coverage of the 2005 World Series of Poker began a month later than it did for last year's event. This in turn might lead to fewer new players joining partypoker.com as they catch poker-fever from the extensive television exposure. The second reason is that industry experts have noted that casual players are spending a lot less money playing than higher-action players, but casual players are the bread and butter revenue providers, especially for large volume sites such as Party Poker.
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