The video gaming industry gained traction during the COVID-19 pandemic thanks to the increased demand for online games and consoles to escape the boredom of being locked at home. The industry participants in this space benefitted significantly from a strong surge in demand.
At the height of the pandemic, Professor Joost van Dreunen of New York University said, “The game industry is swimming in cash. It’s just raining money on these people, on these companies.”
While the interest in outdoor gaming has revived significantly since the COVID-19 restrictions started easing, video games are becoming more immersive, realistic, and advanced daily to keep attracting users. According to Grand View Research, the global video game market is expected to grow at a CAGR of 12.9% through 2030.
The proliferation of smartphones coupled with high-speed internet connectivity powered by 5G and the application of AR/VR in modern gaming is expected to drive the growth of the gaming industry.
As per PwC’s Global Entertainment and Media Outlook, the booming industry is tipped to maintain its rapid growth and could be worth $321 billion by 2026. Given the industry’s long-term growth prospects, quality gaming stocks Playtika Holding Corp. (PLTK) and DoubleDown Interactive Co., Ltd. (DDI) could be ideal buy-and-hold candidates.
Playtika Holding Corp. (PLTK)
Headquartered in Herzliya Pituarch, Israel, PLTK is a mobile gaming entertainment and technology company with a portfolio of casual and casino-themed games.
On March 23, 2022, PLTK acquired JustPlay.LOL, an Israel-based creator of the multiplayer game. This acquisition strengthens the company’s growth strategy by expanding its offerings into high-growth action and battle royale genres.
For the fiscal second quarter ended June 30, 2022, PLTK’s revenue remained flat year-over-year to $659.60 million. The company’s cash and cash equivalents came in at $1.17 billion, up 14.6% from $1.02 billion for the fiscal year ended December 31, 2022. Its total assets increased 7.2% to $3 billion.
Analysts expect PLTK’s EPS for the first quarter ending March 31, 2023, to increase marginally year-over-year to $0.20. Its revenue for the current quarter ending September 30, 2022, is expected to grow 5.4% year-over-year to $670.05 million. Over the past month, the stock has lost 11% to close the last trading session at $12.10.
PLTK’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Quality. Within the Entertainment - Toys & Video Games industry, it is ranked #5 out of 22 stocks. To see PLTK’s rating for Growth, Momentum, Stability, and Sentiment, click here.
DoubleDown Interactive Co., Ltd. (DDI)
Headquartered in Seoul, South Korea, DDI is engaged in developing and supplying digital games on mobile and web-based platforms. Its offerings include DoubleDown Casino, DoubleDown Fort Knox, DoubleDown Classic, Undead World, and Ellen’s Road to Riches.
On January 13, 2022, the company invested $1.5 million in Epic Games, setting its foot into the metaverse. This investment allows the company to gain exposure to the rapidly growing metaverse.
For the fiscal first quarter ended March 31, 2022, DDI’s total operating expenses decreased 14.4% year-over-year to $60.80 million. The company’s net cash flow from operating activities increased 28.8% year-over-year to $28.38 million. Also, total assets increased 1.9% to $988.19 million, from the value of $969.81 million for the fiscal year ended December 31, 2021.
For the fourth quarter ending December 31, 2022, DDI’s EPS and revenue are expected to increase 1,080% and 1.7% year-over-year to $4.13 and $87.75 million, respectively. The stock has gained 5.6% over the past month to close the last trading session at $10.50.
DDI’s POWR Ratings reflect these solid prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Value and Sentiment and a B for Stability and Quality. Within the same industry, it is ranked first. Click here to see the ratings of DDI for Growth and Momentum.
PLTK shares were trading at $11.73 per share on Friday afternoon, down $0.37 (-3.06%). Year-to-date, PLTK has declined -32.16%, versus a -12.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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