Today’s video game industry is bigger and more diverse than ever. Today’s video games offer photo-realistic graphics and in many cases simulate reality to an astonishing degree. In addition, technological advancements are expected to drive the growth of the market.
In addition, the growing internet penetration rate and easy availability of internet games are boosting the gaming industry. The global video game market was valued at $195.65 billion in 2021 and is expected to grow by a compound annual growth rate of 12.9% from 2022 to 2030.
Hence the fundamentally strong video game stock Playtika Holding Corp. (PLTK) could be an ideal investment.
But the gaming sector ability to weather an economic downturn is being questioned. Data from analytics firm NPD shows U.S. consumer spending on video games is expected to decrease of 8.7% this year.
Against this background, the fundamentally weak gambling stocks Roblox Corporation (RBLX) and Unity Software Inc. (you) can now be avoided.
Stock to buy:
Playtika Holding Corp. (PLTK)
PLTK develops mobile games worldwide. It owns a portfolio of casual and casino themed games and distributes its games to the end customer through various web and mobile platforms. The company’s headquarters are located in Herzliya Pituarch, Israel.
On September 7, it was reported that Bingo Blitz, a PLTK studio and popular free bingo game, had entered into a one-year partnership with famed actress Drew Barrymore to usher in a new era of bingo. The reinvention of the classic game could benefit the company.
PLTK’s revenues increased marginally year-over-year to $659.60 million in the second fiscal quarter ended June 30, 2022. For the six months ended June 30, total income grew 1.9% from the same period last year to $119.10 million, while cash flow from operating activities increased 27% year-over-year to $241.10 million.
The consensus EPS estimate of $0.79 for the fiscal year ended December 2023 represents a 21.2% year-over-year improvement. Similarly, the consensus revenue estimate of $2.76 billion for the same year represents a 4.8% year-over-year increase.
The stock is up 10.7% in the past five days, closing its last trading session at $10.37.
PLTKs POWR ratings reflect these promising prospects. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings rate stocks on 118 different factors, each with its own weighting.
PLTK has an A in Value and a B in Quality. Within 22 stock Entertainment – Toys and Video Games industry, it is ranked #6.
In addition to what has been mentioned above, we also assessed PLTK for growth, momentum, stability and sentiment. Get all PLTK reviews here.
Stocks to Avoid:
Roblox Corporation (RBLX)
RBLX operates as a developer and operator of an online entertainment platform. The company’s offerings include Roblox Studio, Roblox Client, Roblox Education, and Roblox Cloud.
RBLXs loss from operations rose 19.1% from a year ago to $170.27 million in the fiscal second quarter ended June 30. Adjusted EBITDA declined 69.6% year-over-year to $54.64 million.
The company’s net loss attributable to common shareholders grew 25.9% year-over-year to $176.44 million, while net loss per share attributable to common shareholders increased 20% year-over-year up to $0.30.
RBLX’s earnings per share will likely come in at $0.31 negative for the fiscal third quarter ended September 2022, indicating a 136.1% decline from the same period last year. Revenue is estimated at $681.04 million for the same quarter.
Shares of RBLX are down 62.1% so far to close out the latest trading session at $39.15. The stock has fallen 14.7% in the past six months.
It’s no surprise that RBLX has an overall F rating, which translates to strong sales in our POWR rating system.
The stock also has an F score for stability and sentiment and a D for growth, value and momentum. It ranks last in the same industry.
To see additional POWR quality ratings for RBLX, click here.
Unity Software Inc. (you)
You work as a platform for creating and running real-time three-dimensional content. The company’s platform has two segments: Create Solutions and Operate Solutions. Offerings include Unity Ads and Unity IAP (In-App Purchases) to help users monetize content, Multiplay to host multiplayer games, and Vivox to enable communication between players and players.
In September, it was announced that AppLovin Corporation (APP) had canceled his plans to take over you after the latter opposed the $17.54 billion bid. This deal could have combined two prominent providers of mobile developer tools.
For the fiscal second quarter ended June 30, 2022, U’s non-GAAP loss from operating activities increased 6.351% year over year to $44.13 million. Non-GAAP net loss increased 3,862.5% year-over-year to $53.14 million. Non-GAAP net loss per share grew 1,700% year-over-year to $0.18.
Analysts expect U loss per share for the fiscal third quarter (ending September 2022) to grow 147.7% year-over-year to $0.15. The company’s revenue is expected to be $326.51 million for the same period.
The stock is down 74.9% since the start of the year to close its last trading session at $35.81. The stock has plunged 61.8% in the past six months.
U’s overall F rating translates into strong sales in our proprietary rating system.
The stock also has class D for value and stability. It ranks 21st in the same industry.
In addition, we also assessed you on growth, momentum, sentiment and quality. To see all the POWR ratings for you, click here.
RBLX shares traded at $34.84 per share Friday afternoon, down $4.31 (-11.01%). Year-to-date, RBLX is down -66.23%, compared to a -22.35% gain for the benchmark S&P 500 index over the same period.
About the author: Kritika Sarmaho
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She received her bachelor’s degree in commerce and is currently enrolled in the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More…
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