Playtika Mum on Potential Sale, Analysts Pare Price Targets

Posted on: May 11, 2022, 10:21h. 

Last updated on: May 11, 2022, 03:10h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Playtika (NASDAQ:PLTK) are surging today despite the company reporting downbeat first-quarter results and not providing an update on a potential sale.

Playtika
A billboard advertising Playtika in Israel. The stock is soaring today despite a batch of price target cuts. (Image: Haaretz.com)

In midday trading, the mobile gaming company is higher by 6.15%, stemming a 31% slide over the past week. After the close of US markets Tuesday, the Israeli gaming firm posted earnings per share of 20 cents on sales of $676.9 million. Analysts expected earnings of 22 cents, while revenue missed the consensus estimate by 0.37%.

Playtika forecast 2022 sales of $2.73 billion, below analysts’ estimate of $2.82 billion. Further muddying the waters, the mobile games developer offered no update on the strategic alternatives plan announced in February. It also cautioned analysts on a conference call to not bring up the issue.

We want to note that we do not have an update on our previously announced evaluation of strategic alternatives, and will not be answering questions related to this topic,” said Dave Niederman, vice president investor relations on the call.

Playtika shares are off almost 28% since the strategic alternatives announcement was delivered on Feb. 24. Potential suitors haven’t been mentioned over the past three months.

Playtika Stock Firm Despite Challenges

There’s no denying Playtika stock is in a slump — it’s down 53% over the past year — but at least for today, it’s holding up relatively well.

That’s impressive when considering the aforementioned weak 2022 outlook, lack of visibility on finding a buyer, and the fact that multiple analysts trimmed price targets on the Caesars Casino developer. Entering today, the consensus price forecast on the gaming stock was $26.50, meaning the stock needs to more than double to get there. Plenty of analysts don’t see that happening.

Credit Suisse analyst Stephen pares his Playtika price outlook to $24 from $30, while Baird analyst Colin Sebastian reduces his price estimate on the stock to $16 from $27. Sebastian called the company’s first-quarter results solid in the face of rising headwinds.

Wedbush analyst Michael Pachter cuts his Playtika price target to $22 from $35 while maintaining an “outperform” rating on the shares. MKM Partners analyst Eric Handler goes to $17 from $25, noting adjusted financial expectations could be more achievable for the gaming company.

Playtika Still Has Headwinds

Playtika sports a market value of $5.75 billion and long-term debt of $2.42 billion, making the company easily digestible for any number of potential suitors.

Still, analysts are concerned about slowing growth in the mobile casino space and Playtika’s dependence on a small number of titles.

Additionally, the stock is a favored target of short sellers, and majority investor Playtika Holding UK II Limited (PHUK II) is mulling selling 15% to 25% of the company’s shares outstanding. Should that transaction materialize, it’d almost certainly act as a drag on the stock.