BofA upgrades Playtika as it sees 48% upside on strong cash flow

Published 26/03/2025, 15:02
© Shutterstock

Investing.com -- Bank of America upgraded Playtika Holding Corp (NASDAQ:PLTK) to Buy from Underperform and raised its price target to $6.50 from $6.00 on strong free cash flow and potential growth upside. The new target is a 48% upside from current levels.

Playtika, a top mobile gaming company, has the highest profitability in the industry with 30% EBITDA margins and owns three of the longest-running game franchises.

While mobile gaming is a mature industry, it is still growing by around 4% annually. BofA highlighted that Playtika’s 21% FCF yield and 9% dividend yield reduce the risk of further downside.

BofA pointed to three factors behind Playtika’s recent stock weakness. The exit of a large shareholder in a low-liquidity market. Concerns that Playtika’s return to growth is taking too long. While there is investor preference for mobile ad companies like AppLovin (NASDAQ:APP) over gaming publishers.

BofA raised its 2025 revenue and profit estimates to $2.85 billion and $740 million, respectively, after analyzing data from January and February.

It believes Playtika’s current guidance is overly cautious, implying a 6% revenue decline for 2025, despite the company’s efforts to restart growth. Playtika’s SuperPlay unit is expected to generate $465 million in revenue, up 22% year-over-year, with current data tracking 43% higher than last year.

BofA cautioned that while Playtika aims to split its FCF between dividends and acquisitions, this is not a firm policy. The motivations of its largest shareholder, which owns 63%, remain unclear, posing a potential risk to the dividend.

BofA’s $6.50 price target values Playtika at 6x its 2025 EBITDA, which is in line with other mobile gaming companies. At this price, Playtika’s FCF yield would still be 14%, offering a better return than its 2029 bonds.

We see a favorable risk/reward setup for the next 12 months, BofA concluded, citing the potential for stronger-than-expected growth in 2025.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.