With interest rates rising amid a turbulent macroeconomic environment, discretionary expenditure is set to decline. This is expected to hit non-essential sectors, such as entertainment, which is expected to see softening of demand. However…
interactive entertainment is set to remain an exception. Gaming received a boost amid widespread lockdowns during the pandemic.
The market for gaming has been growing with the increasing per capita income, growing interest, and the increasing number of dual-income households, supplementing the transformation of the world market. With the rising penetration of smartphones and cloud adoption, the global gaming market is expected to grow at 13.2% CAGR to reach $545.98 billion by 2028.
With these developments in mind, it could be a good time to invest in entertainment stocks Playtika Holding Corp. (PLTK), DoubleDown Interactive Co Ltd (DDI), and GRAVITY Co. Ltd. ADR (GRVY).
Playtika Holding Corp. (PLTK)
PLTK is a mobile game developer based in Herzliya, Israel. The company distributes its portfolio of casual and casino-themed games to the end customer through various web and mobile platforms.
On November 21, PLTK announced the execution of an agreement for a $25 million minority investment in Turkish mobile gaming company Ace Games (“Ace”). The company believes this to be an important milestone in the execution of its new games investment strategy.
On October 10, PLTK announced that it had accepted 51,813,472 shares out of 73,905,922, validly tendered for purchase for a total cost of $600 million. This is expected to positively impact the EPS of outstanding shares of PLTK in the coming years.
For the third quarter ended September 30, 2022, PLTK’s revenue increased 1.9% year-over-year to $647.8 million. During the same period, casual games, representing 54.9% of overall revenues, grew 14.4% year-over-year, while the company’s Average Daily Paying Users (DPUs) increased 5.8% year-over-year to 3,10,000 users.
PLTK’s adjusted EBITDA for the quarter stood at $230.7 million, while its net income came in at $68.2 million or $0.17 per share. The company’s total assets stood at $2.99 billion as of September 30, 2022, compared to $2.8 billion as of December 31, 2021.
Analysts expect PLTK’s revenue and EPS for fiscal 2023 to increase 2.8% and 30.3% year-over-year to $2.69 billion and $0.84, respectively. The stock has dipped 1.5% over the past month to close the last trading session at $9.27.
PLTK’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PLTK has an A grade for value and a B for Quality. Within the Entertainment – Toys & Video Games industry, it is ranked #5 out of 21 stocks.
Click here for additional POWR ratings for Sentiment, Momentum, Growth, and Stability for PLTK.
DoubleDown Interactive Co Ltd (DDI)
DDI, based in Seoul, South Korea, is engaged in developing and supplying online and mobile games in domestic and foreign markets. Its popular offerings include DoubleDown Casino, DoubleDown Fort Knox, DoubleDown Classic, and Ellen’s Road to Riches.
During the third quarter, DDI agreed in principle to settle the Benson class action complaint and is not expected to record any future charges related to it.
As part of its growth plans, DDI is now focused on releasing its new title, Spinning in Space, before year-end while continuously developing…
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