META - Playtika rises as BofA upgrades citing improved outlook for mobile gaming

2023-07-07 08:50:09 ET

Playtika ( NASDAQ: PLTK ) shares rose nearly 4% in pre-market trading on Friday as investment firm Bank of America upgraded the digital entertainment company, citing an improved outlook for mobile gaming.

Analyst Omar Dessouky raised his rating on Playtika ( PLTK ) shares to neutral from underperform, stating that he now expects in-app purchases to decline just 1% year-over-year, up from a prior view of a 6% decline, due to a milder recession that is likely to start in the first-half of next year, compared to a previous view for a recession in 2023.

"[Third-party] industry data are supportive: monthly revenue has been sequentially stable since Sept  ‘22, and ad network Cost Per Install appears to have stabilized in ’23 implying advertiser Return on Ad Spend is in equilibrium," Dessouky wrote in an investor note.

Dessouky noted that it's unlikely that mobile game publishers return to pre-COVID growth rates of between 8% and 12% year-over-year, as acquiring long-term value users is "challenged" because of Meta's ( META ) degraded targeting because of Apple's App Tracking Transparency initiatives.

"We see more tepid growth for Social Casino games (45% of PLTK’s revenue), which are particularly reliant on high LTV gamers," Dessouky added.

However, Dessouky added that Playtika ( PLTK ) management has been "highly responsive" to slowing industry conditions and implemented cost savings programs, both in advertising and fixed costs, which have boosted margins by roughly 480 basis points.

Analysts are largely bullish on Playtika ( PLTK ). It has a BUY rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates LYFT a HOLD .

More on Playtika

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• Playtika gains amid report of private equity takeover interest
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