A 3.8% slide in the share price of online casino operator 32Red (TTR:AIM) to 69.8p hasn’t knocked our confidence in the £53 million cap’s growth prospects and is predominantly due to investors taking profits following its recent strong run.

The group’s encouraging trading update shows a 22% rise in net gaming revenues to £18.6 million in the six months to 30 June.

32Red announced the acquisition of Roxy Palace on 14 July which helped drive its share price to a high of 76p.

32RED - Comparison Line Chart (Rebased to first)

Today’s slip could reflect investors’ concerns about the drop in casino player yield from £400 to £380. This fall is due to the company’s increased spend on marketing, which has boosted the number of new players by 12%.

The second half of the year has got off to a strong start with revenue for the first 20 days of July up 35%.

The group’s foray into Italy is reaping rewards with a 67% rise in revenue in the first half. Its step up in marketing investment means it’s on track for a 2% market share.

Numis forecasts pre-tax profit of £5.1 million for the full year, based on an estimated 18% rise in revenue.

‘Whether our profit forecast is beaten depends on the rate of reinvestment in marketing and, given the success to date, management may prefer to step up investment rather than harvest profits,’ says analyst Ivor Jones.

Numis’ target price is 120p, implying upside of 72%.

Issue Date: 22 Jul 2015