Bwin.party Digital Entertainment Plc : The bearish trend should continue
By Maxime Nonglaton
Entry price | Target | Stop-loss | Potential |
---|---|---|---|
GBX 102.2 | GBX 0 | GBX 115.5 | +100% |
A month ago, we forecasted a downtrend with a target price at GBp 102. This target was reached and we reiterate our opinion. In a bearish trend, BPTY continues to decline.
From a fundamental viewpoint, the group is in a bad financial situation. Analysts have recently downgraded their forecasts for earnings per share. This indicator is often a precursor of a declining profitability and a worsening climate of investor confidence. Even if the company has a lot of cash, it is overvalued : BPTY’s PER for 2012 is 38.9x and 16.3x for 2013 and growth rates are low.
From a technical viewpoint, prices are in a downward trend. Moving averages are trending down and put pressure on the stock, which confirms this downward momentum. This trend may continue toward the GBp 95 support. Moreover, the security is testing a pivot point at GBp 102.6 in weekly data and the significant breakdown of this level would be a new bearish signal.
Taking into account fundamental and technical elements, investors can initiate a short position in BPTY with a first target price at GBp 95. If the security crosses this level, the second target price will be the long term support at GBp 83.4. A return towards GBp 115.5, the short-term resistance area, will invalidate the bearish strategy, which justifies a stop loss.