America Changes the Game

Our original Playtech recommendation dates back to 2024, and the subsequent exceptional distribution following the sale of Snaitech means the current share price alone does not provide a fair picture of the position’s total return. More importantly, however, the business we are adding to today looks very different from the one we originally bought.

The July trading update was one of the strongest released by any UK-listed company this earnings season. Management not only reported first-half trading significantly ahead of expectations, but also upgraded full-year profit guidance by more than 20%. With momentum accelerating across the Americas and the shares still trading well below last year’s highs, we believe the recent breakout marks the beginning of the next stage of Playtech’s recovery.

The investment phase is starting to pay back

For several years Playtech has been investing aggressively in regulated online gambling markets, particularly across North and Latin America. Those investments have inevitably weighed on short-term profitability and required investors to be patient.

The latest trading update suggests that patience is finally beginning to pay off.

Management expects first-half adjusted EBITDA to exceed €155 million, driven by exceptionally strong trading in the United States together with continued momentum across Mexico, Colombia and several European markets.

Perhaps even more importantly, the acceleration strengthened as the half progressed, with management specifically highlighting that trading improved further during May and June.

The key driver has been Playtech’s partnership with Hard Rock Digital. Following several years of investment, Hard Rock has become one of Playtech’s largest customers, generating returns that management says have materially exceeded expectations.

Importantly, management has been careful to temper expectations. Revenue from Hard Rock is expected to normalise during the second half as the initial launch period passes. Rather than viewing this negatively, we see it as a sign that management is setting realistic expectations rather than chasing short-term excitement.

Even allowing for this moderation, Playtech now expects full-year adjusted EBITDA of at least €270 million, comfortably ahead of previous analyst expectations of around €219 million.

That represents a meaningful earnings upgrade rather than simply meeting consensus a little earlier than expected.

America is becoming the growth engine

The bigger story extends well beyond one successful customer relationship.

That investment will weigh slightly on second-half profitability before contributing more meaningfully during 2027.

This is exactly the type of investment cycle we like to see.

Management is deliberately sacrificing a small amount of short-term earnings to secure a much larger future revenue opportunity within one of the world’s fastest-growing regulated gaming markets.

The result is that Playtech now enjoys multiple independent growth drivers rather than relying on any single geography.

A stronger balance sheet provides flexibility

One of the less appreciated improvements has been the continued strengthening of Playtech’s balance sheet.

The company finished 2025 with net cash of approximately €87 million, a remarkable turnaround from the leveraged balance sheet investors had become accustomed to several years ago.

Having cash rather than debt provides considerable strategic flexibility.

It allows Playtech to continue investing into new regulated markets while also providing optionality for acquisitions, technology investment or future shareholder returns as profitability continues to improve.

Following the Snaitech disposal, the company no longer needs to balance capital allocation between fundamentally different business models. Management can now focus entirely on expanding the higher-quality B2B software platform.

Technical picture suggests momentum is returning

The trading update also produced an important change in the technical picture.

Equally encouraging is the fact that the shares have remained well above both moving averages despite the recent consolidation.

Momentum indicators are also beginning to improve. Relative Strength has recovered meaningfully from earlier weakness, while the broader uptrend from last autumn remains intact.

Provided the recent earnings gap continues to act as support, the technical picture increasingly supports the improving fundamental outlook.

Valuation still looks reasonable

Despite the sharp reaction, valuation still appears attractive.

Playtech currently trades on around 16.6 times forecast earnings.

Given the scale of the latest earnings upgrade, ongoing growth opportunities across regulated markets and a strengthened balance sheet, that multiple does not appear demanding.

Consensus forecasts have already begun moving higher following the trading update, although there remains scope for further upgrades if momentum across the Americas continues into next year.

The shares also remain almost 18% below their 52-week high despite one of the strongest trading updates delivered this year.

For businesses experiencing meaningful earnings revisions, share prices often take longer than expected to fully reflect improving fundamentals.

With earnings momentum improving, valuation remaining reasonable and several structural growth opportunities still ahead, we believe the investment case has strengthened sufficiently to justify increasing our position.

Five Key Takeaways

1. Major earnings upgrade: Playtech now expects at least €270 million of adjusted EBITDA in 2026, comfortably ahead of previous market expectations.

2. Americas driving growth: Strong momentum across the US and Latin America is beginning to generate meaningful returns from years of investment.

3. Net cash balance sheet: Approximately €87 million of net cash provides flexibility to invest while reducing financial risk.

4. Technical momentum improving: The earnings gap has held, with shares remaining above both the 50-day and 200-day moving averages.

5. Second tranche buy: We believe Playtech has entered a new phase where improving operational performance, rather than restructuring, is becoming the primary driver of shareholder returns.