Playtika (NASDAQ: PLTK) shares jumped more than 21% after Bank of America issued a double upgrade on the Israeli-based mobile game developer, raising its rating from Underperform to Buy.
The upgrade reflects confidence in Playtika’s profitability, financial strength, and long-term growth prospects within the mobile gaming industry.
“PLTK boasts the industry’s highest profitability (30% EBITDA margins), the industry’s largest DTC platform, and three of the largest and longest-running franchises in mobile gaming history. It operates within the mature, but still growing mobile gaming industry, which we expect to grow at least 4% Y/Y for the foreseeable future,” BofA Securities analyst Omar Dessouky said.
BofA’s optimism is supported by Playtika’s next twelve months (NTM) free cash flow yield of 21% and a dividend yield of 9%.
These metrics suggest limited downside risk and underscore the management’s ability to sustain strong financial performance.
Playtika’s share price performance
Playtika has struggled significantly in the past month, with its share price plunging 42%.
Despite Wednesday’s rebound, the stock remains down about 23% compared to a month ago.
This decline adds to a challenging year for shareholders, as Playtika’s stock has fallen 24% over the past 12 months.
Following this sharp drop, Playtika’s valuation appears relatively low.
With roughly half of US companies trading at a price-to-earnings (P/E) ratio above 18x, Playtika’s 9.3x P/E may suggest an attractive investment opportunity.
However, the company’s weak earnings performance has weighed on investor sentiment.
While many firms have posted growth, Playtika has struggled, leading to scepticism about its ability to turn things around. The low P/E likely reflects concerns that its earnings challenges will persist.
Q4 and full-year earnings reflect challenges
Playtika reported a Q4 2024 revenue of $650.3 million, marking a 4.8% sequential increase and a 1.9% year-over-year growth.
However, the company recorded a net loss of $16.7 million, a decline compared to previous periods.
Credit Adjusted EBITDA stood at $183.9 million, down 6.7% sequentially and 2.6% year-over-year.
For the full fiscal year 2024, Playtika’s revenue totaled $2.55 billion, slightly lower than the $2.57 billion recorded in 2023.
Net income for the year declined to $162.2 million from $235.0 million, while Credit Adjusted EBITDA dropped from $832.2 million to $757.7 million.
Despite these challenges, Playtika’s DTC platform saw strong performance, with Q4 revenue of $174.6 million, reflecting 8% year-over-year growth.
Average Daily Paying Users (DPUs) increased 12.6% sequentially to 339,000, while payer conversion improved to 4.2%.
Mixed results across game categories
Playtika’s casual games segment recorded an 11.6% sequential and 11.3% year-over-year revenue increase, driven by strong performances from Bingo Blitz and Solitaire Grand Harvest.
However, its social casino-themed games segment saw a 4.9% sequential and 10% year-over-year revenue decline.
Among its top-performing titles, Bingo Blitz generated $159.1 million in revenue, Slotomania contributed $118.4 million, and Solitaire Grand Harvest earned $72.5 million.
Dividend and outlook for 2025
Playtika announced a quarterly dividend of $0.10 per share, payable on April 4, 2025, reinforcing its commitment to returning value to shareholders.
Looking ahead, the company expects FY2025 revenue between $2.80 billion and $2.85 billion, with Credit Adjusted EBITDA ranging from $715 million to $740 million.
Management remains focused on strategic acquisitions, disciplined capital allocation, and leveraging its DTC platform for future growth.
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