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Investing.com - Texas Capital Securities initiated coverage on DoubleDown Interactive Co Ltd. (NASDAQ:DDI) with a Buy rating and a price target of $20.00 on Tuesday. The company, currently valued at $470 million, shows strong financial health with a "GREAT" rating according to InvestingPro analysis.
The firm highlighted DDI’s strong financial position, noting the company’s current net cash of approximately $9 per share is comparable to its share price, while it maintains a negative enterprise value to EBITDA ratio for calendar years 2025 and 2026. This analysis is supported by DDI’s impressive current ratio of 16.04 and robust gross margin of 70.2%. InvestingPro analysis indicates the stock is currently undervalued.
Texas Capital Securities emphasized that despite the low valuation, DDI generates over $2.50 per share in visible, net free cash flow from its high-margin, asset-light online games business.
The firm’s analysis excludes potential benefits from an increased mix of direct-to-consumer payments, regulatory-driven contraction of sweepstakes gaming competition, and a likely iGaming cash flow inflection in 2026.
Texas Capital Securities also pointed to DDI’s balance sheet flexibility, which offers dividend and M&A opportunities, while basing its price target on what it considers an "un-heroic" 2025 estimated 4x EV/EBITDA multiple.
In other recent news, DoubleDown Interactive announced the pricing of an underwritten secondary offering of 4,347,827 American Depositary Shares (ADSs) at $8.50 per ADS. This offering is conducted by selling shareholder STIC Special Situation Diamond Limited and involves existing shares, meaning DoubleDown Interactive will not receive any proceeds from the transaction. Roth Capital Partners (WA:CPAP) is leading the offering with Texas Capital Securities as co-manager, and the transaction is expected to close by June 13, 2025, pending customary conditions. Additionally, Roth/MKM initiated coverage of DoubleDown Interactive with a Buy rating, setting a price target of $16.00. The research firm highlighted the company’s net cash position, projecting it to exceed $10 per share by the end of 2025. Roth/MKM pointed out the company’s current valuation as being significantly below its peers in the gaming sector. They suggested that potential cash deployment through acquisitions or capital returns could enhance the stock’s value in the future.
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