PLTK - Playtika dips after downgrade insider sale

2023-04-13 11:02:27 ET

Israel-based mobile game developer Playtika ( NASDAQ: PLTK ) was a standout decliner in a broadly higher Communications sector Thursday morning, down 5.5% as BofA downgraded it to Underperform, and a key stockholder sold $3.5M worth of shares.

The stock ran up nearly 28% over the past month amid some renewed buyout speculation, analyst Omar Dessouky noted, but added that its current free cash flow yield is not likely to appeal to investors -- and shareholders are unlikely to underwrite a return to a 10%-plus long-term growth model.

The rally has given investors "an excellent opportunity to reallocate out of mobile gaming," Dessouky said, re-establishing Playtika's ( PLTK ) only Sell-equivalent rating on the Street.

While gaming is believed recession-resistant, BofA would expect a U.S. recession (to begin in the second half of the year) to cut consumer spending.

"Spending by loyal mobile gamers is thought to be recession-resistant by both management teams and sell-side analysts," Dessouky said. "We disagree, based on research in a corollary market –- casino gaming. Thus, we expect the decline in average spend per paying gamer to continue in 2023."

BofA has a price target of $10 on Playtika stock ( PLTK ), implying 11% further downside from here.

Also, an SEC filing notes that On Chau, a 10% owner of Playtika ( PLTK ), sold 300,000 shares on Tuesday at an average price of $11.7338, for gross proceeds of $3.52M.

The move left On with indirect beneficial holdings of 80,810,506 shares.

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