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On Tuesday, B.Riley analysts initiated coverage on DoubleDown Interactive Co Ltd. (NASDAQ: DDI), a well-known developer and publisher of interactive, casual web-based, and mobile games. They have given the stock a Buy rating and set a 12-month price target of $23.00 per share. According to InvestingPro data, this target represents significant upside potential, with analysts’ consensus being strongly bullish. The stock currently trades at a P/E ratio of just 3.9x, suggesting significant undervaluation relative to peers.
The company, which primarily operates in the social casino business generating 90% of its revenue, has been performing well, according to the analysts. In 2024, the social casino revenue saw a slight increase of 1.2%, which was credited to gains in market share. These gains were a direct result of the company’s effective strategies focused on player retention and monetization, leading to robust margins and cash flow. InvestingPro data reveals an impressive gross profit margin of nearly 70%, demonstrating the company’s operational efficiency.
DoubleDown Interactive reported a free cash flow (FCF) of $148 million in 2024, which translates to roughly $3 in net cash generation per American Depositary Share (ADS). This financial performance has boosted the company’s total net cash to $7.69 per ADS. Moreover, DoubleDown Interactive’s acquisition of SuprNation, which owns a real-money gaming platform based in Europe, is expected to contribute to top-line growth.
The analysts underscored the stock’s value by pointing out that, after considering the projected cash flow generation, DoubleDown Interactive’s shares are trading at less than 1 times the estimated 2025 enterprise value to EBITDA (EV/EBITDA). This valuation is seen as exceedingly pessimistic when compared to peers in the social casino gaming industry, which typically trade at around 5 times EV/EBITDA.
In other recent news, Doubledown Interactive reported its financial results for the fourth quarter of 2024, showing a slight decrease in quarterly revenue to $82 million from $83.1 million the previous year. However, the company experienced a notable 10% increase in full-year revenue, reaching $341.3 million. The company’s adjusted EBITDA for the year rose by 16% to $141.9 million, reflecting strong operational performance. Doubledown Interactive maintained robust cash flow from operations, totaling $148.5 million for the year. The company also holds a solid cash position with $415 million in cash and equivalents as of December 31, 2024. The firm is exploring potential mergers and acquisitions in the gaming sector, aiming to enhance its market presence. Additionally, Doubledown Interactive is focused on expanding its market share in the UK and Sweden, particularly through its iGaming business, Super Nation. Analysts have noted the company’s strategic initiatives to sustain growth amid a challenging industry landscape.
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