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Playtika bounces back as bank upgrades mobile developer from "Underperform" to "Neutral"

The upgraded rating saw a small but noticeable rise in stock price by 4%
Playtika bounces back as bank upgrades mobile developer from

Israeli mobile developer Playtika saw an upgrade in its investment rating from "Underperform" to "Neutral" and a subsequent stock rise of 4% as the company remains focused on building on its existing portfolio.

 Playtika previously saw a dip in financials and a subsequent round of restructuring, layoffs and the announcement they were cancelling future developments in favour of focusing on their existing portfolio. It was a fairly drastic set of measures, and although Playtika isn't out of the woods yet, it seems that their efforts were crucial in bringing the company back to comfortably solid ground. Omar Dessouky, analyst at the Bank of America upgraded the company's rating in investment from "underperform" to "neutral".

Underperform, in this case, means what it says on the tin, that analysts believe Playtika will underperform in the stock game. However, with this upgrade it indicates that their performance is, while still far from certain, not as bad as it was once believed it could be. According to Dessouky this optimism is driven by beliefs that a potential recession could be shorter than anticipated, and that in-app purchases for mobile games could slip only as little as 1% despite some fears of a further post-Covid slump.

Playing nicely for Playtika?

The shift is going to be a welcome one for Playtika, as mentioned previously the company has gone to great lengths to cut costs including with some extensive layoffs. Their focus on growing their existing portfolio of mobile games and other leisure titles seems to have paid off, however, and may be a model to follow for other companies in the same boat. By eschewing the usual cycle of newer titles on a constant release basis the developer seems to regained their stability.

At the time, CFO Craig Abrahams commented, "While we saw that our new games received positive feedback from our players and achieved strong retention numbers, the marketing environment and increasing CPIs for new games made it challenging for us to scale these games profitably. Based on the current marketing environment, we made the decision to temporarily suspend our new game development pipeline until the ROI for new games is economically viable."

Playtika's optimistic new initiatives, including securing 314 acres of land in the Amazon and a reported $737.5m offer to buy Rovio - which was trumped by gaming giant Sega - can perhaps be attributed to their regained stability. Indeed, perhaps the greater element to the story is the news that at least one major financial institution is optimistic about mobile gaming going into the second half of 2023. It mirrors growing optimism and VC interest despite rocky times for other areas in the broader tech sector, as mobile continues to grow across the globe.