Berenberg upgrades Paddy Power to 'hold', sees US concerns as being 'premature'

Berenberg's current analysis valued the market opportunity at as much as $25bn per year, of which it believes Paddy Power could take 15% "over the long-term". The broker also praised Paddy Power Betfair's joint-venture with FanDuel for affording the group an attractive opportunity to align itself with an established brand and also highlighted further benefits provided to it via land-based partner Boyd Gaming's distribution capabilities.

While the German broker did cut its price target on Paddy Power Betfair from 7,000p to 6,500p, its analysts said the recent slump in share price meant they now actually saw some upside, prompting them to revise their rating from 'sell' to 'hold'.

"Despite the few challenges still remaining, we think most of the negatives are priced in," they said.

Berenberg now thinks that the US opportunity is "more interesting" than it had initially thought. However, the broker still highlighted risks as Paddy Power's underlying established business had "only just started improving".

Indeed, stripping out the US sports betting opportunity, the broker noted that it still saw "significant downside potential", suggesting that taking a cautious approach may be the best.

However, on the upside, Berenberg acknowledged that the group's digital gaming business, as well as the Paddy Power brand itself, had "shown signs of improvement" – if the outfit was capable of maintaining this improved performance, the broker said a "more positive stance on the shares would be justified".