On Friday, Roth/MKM maintained a Neutral rating on Playtika Holding Corp. (NASDAQ:PLTK) stock with a price target of $8.00. The firm's stance remains cautious due to Playtika's ongoing challenges in generating organic revenue growth.
This evaluation comes in light of Playtika's recent acquisition of SuperPlay, the creator of two popular mobile games, Dice Dreams and Domino Dreams. The transaction involves a $700 million cash payment and the possibility of additional earnouts over the next three years.
Playtika's management is optimistic about scaling SuperPlay's titles and achieving profitability by 2026. The acquisition deal stipulates potential annual earnouts that could total $1,250 million, contingent on meeting certain revenue growth and EBITDA profitability targets. The initial $700 million payment for SuperPlay is funded from Playtika's cash reserves and equates to 2.6 times SuperPlay's trailing twelve months (TTM) revenue. This valuation mirrors the terms of Playtika's previous acquisition of Supertreat in 2018.
Playtika's successful reduction of the acquisition multiple from 2.6x to 0.8x for Supertreat within three years is a historical benchmark for the company. SuperPlay also has two additional games in development, which are not currently included in the earnout calculations but may provide future value.
Investors can expect more detailed financial projections for 2024 as part of Playtika's third-quarter earnings release, where the company will provide pro-forma guidance incorporating the SuperPlay acquisition. The acquisition is seen as a strategic move to enhance Playtika's intellectual property portfolio and drive long-term profitability, despite near-term revenue growth concerns.
In other recent news, Playtika Holding Corp is set to acquire SuperPlay, a mobile gaming firm, in a deal that could reach up to $2 billion. The acquisition, expected to close in the fourth quarter, includes titles like Dice Dreams and Domino Dreams, which generated between $87 and $88 million in revenue in Q2 2024. Analysts at BTIG maintained a neutral rating on Playtika following the announcement, while TD Cowen maintained its buy rating.
Playtika's Q2 2024 earnings showed a slight decrease in revenue, reaching $627 million, marking a 3.7% decrease sequentially and a 2.5% drop year-over-year. Despite this, the company displayed growth in its direct-to-consumer business, particularly with its Bingo Blitz title, and is set to launch a new game, Claire's Chronicles, in Q2 2025.
These recent developments indicate Playtika's strategic moves to expand its portfolio and diversify beyond social casino games. The company's management team is scheduled to provide more details and discuss the implications of the SuperPlay acquisition in an upcoming call.
InvestingPro Insights
As Playtika Holding Corp. (NASDAQ:PLTK) navigates its recent acquisition of SuperPlay, real-time metrics from InvestingPro provide a clearer picture of the company’s financial standing. Notably, Playtika boasts a healthy market capitalization of $3.05 billion, which underscores its significant presence in the digital gaming space. Additionally, the company's P/E ratio stands at 14.16, suggesting that investors may find the current share valuation reasonable in comparison to its earnings. More importantly, Playtika's gross profit margin over the last twelve months as of Q2 2024 is an impressive 72.52%, indicating a strong ability to retain revenue after the cost of goods sold is accounted for.
Two key InvestingPro Tips highlight the company's financial health and future profitability. First, Playtika's liquid assets exceed its short-term obligations, providing financial flexibility and stability. Second, analysts predict the company will be profitable this year, which aligns with management's optimism regarding scaling SuperPlay's titles and achieving profitability by 2026. With Playtika being profitable over the last twelve months, investors may find reassurance in the company's ability to generate earnings. For those seeking a deeper dive into Playtika's financials, InvestingPro offers additional tips and a comprehensive analysis at https://www.investing.com/pro/PLTK.
Understanding these metrics and tips could be particularly valuable for investors who are weighing Roth/MKM's neutral rating against the potential for Playtika's long-term growth and profitability. With the company's next earnings date slated for November 6, 2024, stakeholders will be looking forward to seeing how these financial indicators play out in the wake of the SuperPlay acquisition.
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