Deutsche Bank Cuts 500.com Shares To Sell

In a report published Friday, Deutsche Bank analysts downgraded the rating on 500.cm Ltd (NYSE: WBAI) to Sell on persistent regulatory uncertainty, while raising the price target to $13.80.500.com's 1Q results were short of the Deutsche Bank estimates due to a larger-than-expected impact of the suspension of lottery sales. "The commission rate also declined to 8.6% (-1.3 QoQ) , 0.9ppt short of DBe, due to a 2% commission rate cut by a partner-province during the Q," the analysts mentioned."We expect further commission rate declines once the co's platform is connected to the national system," the analysts added.Although the company is expected to attain a strong market position once online lottery sales is resumed, there is continued uncertainty related to the time of the re-launch, the size of the license regime and the nature of new guidelines.500. com is currently helping the MOF and Sports Administration Center in the completion of internal system testing, besides awaiting the completion of various administrative tasks. In the report Deutsche Bank noted, "We expect some public testing after the Sports Admin Ctr reports to the MOF for approval. While business could resume in 3Q, and while 500 could enjoy preferential status initially, the purpose of planned licensing is to open up the market." The company's stock has outperformed the NASDAQ by about 100 percent since April 1. The analysts said this as unwarranted, while explaining, "We feel the current share price envisages potentially overly optimistic assumptions post-moratorium."