MYPS - Playstudios rises 4% as Stifel starts at Buy on mobile gaming turnaround

2023-04-19 12:05:57 ET

Stock in mobile game developer Playstudios ( NASDAQ: MYPS ) rose 4.3% after an initiation at Buy by Stifel, which sees a transition year ahead as the company's market turns around.

"We believe the mobile gaming market has bottomed as the tough COVID comps are behind us, the industry is adapting to privacy changes, and the market shift from growth mode to profitability is largely completed," said analyst David Pang.

The mobile gaming market hit $147B in 2022, according to IDC, and Pang said it's projected to grow in mid-single digits to low double-digits in compound annual growth.

That sets up Playstudios to take advantage, he argued. The company is planning to enhance a unique engagement-based loyalty program -- "playAWARDS" -- that has boosted metrics for the company's games, he said. That should lead to increased reach and traffic and (in the longer term) commercial opportunities in the program.

Meanwhile, there are "multiple levers" to drive improvement in adjusted earnings before interest, taxes, depreciation and amortization, and "close the gap with peers," including core profitability improvement, accretion from an acquisition of Brainium, and building out a direct-to-consumer platform.

Adjusted EBITDA should grow at a compound annual rate of 27% from 2022-2024, he said.

Meanwhile, valuations are "cheap" with shares at 1.5x 2023 revenue, below peers at 2.4x.

He has a target price of $6, implying a further 45% upside.

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