Coincidentally - or not - analysts at Espirito Santo have chosen Cheltenham week to start coverage of Betfair, the world's largest betting exchange, with a sell recommendation.
They say Betfair's technology platform and operational concept are both excellent, but this is not enough to justify the company's premium rating in the sector:
In our view, Betfair is facing a number of regulatory issues as well as increasing competition in its core markets which is only partially offset by opportunities in the US horseracing sector. The stock does not offer good value. We initiate coverage with a sell recommendation and fair value target of 701p.
On the competitive front it is facing a growing threat from existing bookmakers like William Hill and Paddy Power, the analysts say, while regulation in Europe is also an issue:
The online gambling regulatory environment in continental Europe is becoming more problematic as exchange regulation is not automatically covered under sports betting. This may well delay Betfair's entry to regulating markets which has already been the case in Italy. There is also the risk to exchange player liquidity if regulators require a ring fenced platform to ensure money does not flow outside their territories.
Still, the negative comments seem to be having little effect so far, with Betfair's shares up 8.5p at 863p. This compares however with the £13 flotation price in October last year.
