Gaming refers to playing electronic games through different electronic devices such as computers, mobile phones, consoles, or other mediums. Mobile gaming has become one of the most popular forms of gaming in the world, due to its relative affordability.
According to Mordor Intelligence, the global mobile gaming market is forecasted to grow at a CAGR of 12.3% between 2022 and 2027. The market's growth is expected to be driven by the rising adoption of trending technologies for developing games and increasing smartphone penetration.
In today’s article, I will analyze and compare two mobile gaming stocks, Skillz Inc. (SKLZ) and Playtika Holding Corp. (PLTK), to determine which stock is a better buy at current levels.
Based in San Francisco, California, Skillz is a technology company that allows mobile game developers to provide tournaments and grant competitive gaming activity to end-users across the globe. Founded in 2010, Playtika is an Israel-based company that develops mobile games in the United States and worldwide. The company's portfolio includes casual and casino-themed games.
Year-to-Date (YTD), shares of SKLZ are down 60%, while PLTK stock has advanced 11% over the same period.
Recent Developments
On February 24th, Playtika Holding announced that its management team had started the process to estimate the company's potential strategic alternatives to maximize value for stockholders. Under the exploration process, the Board of Directors plans to consider a lot of strategic alternatives, including a sale of the company or other possible transactions. The company's shares have added 17% in after-hours trading following the announcement. Playtika's Chief Executive Officer Robert Antokol said, "The goal of the strategic evaluation process we are announcing today is to ensure we are taking every step possible to maximize value for our stockholders."
Recent Quarterly Performance & Analysts’ Estimates
Skillz Inc. has recently revealed earnings for its fourth quarter of 2021, causing its shares to drop by over 29% on the lower-than-anticipated report and weak 2022 guidance. In Q4, the company’s total revenue grew 60.7% year-over-year to $108.85 million, missing Wall Street's consensus by $5.2 million. The company's net loss was $99 million, representing a 48% increase compared to the fourth quarter of 2020. As a result, Skillz disclosed a GAAP EPS of ($0.25), missing analysts' consensus by $0.10.
Skillz's paying monthly active users stood 56% higher year-over-year at 0.61 million. Besides, its average revenue per paying user increased 3% year-over-year to $59.
When it comes to Skillz's guidance, the company expects 2022 revenue to be $400 million. For the first quarter, Wall Street expects Skillz's EPS to decelerate 13.33% year-over-year to ($0.17). Its revenue is estimated to moderately increase by 6.41% YoY to $89.04 million in FQ1.
On February 24th, Playtika reported earnings for the fourth quarter of 2021. Playtika's revenue rose 13.2% year-over-year to $649.0 million, beating Wall Street's revenue estimates by $7.15 million. Moreover, revenue growth was mainly related to a 31.5% year-over-year increase in casual portfolio segment revenues, which accounted for 51.8% of total revenue. PLTK net income was $102.3 million, up 34.6% year-over-year. Consequently, PLTK's GAAP EPS stood at $0.25, beating analysts' consensus by $0.07.
The company’s daily paying users came in at 311,000 in the fourth quarter, representing a 14% year-over-year growth. Moreover, the average revenue per daily active user increased 15% YoY to $0.68.
For the next quarter, analysts project Playtikas' EPS to be $0.23, representing a 155.11% year-over-year increase. Besides, analysts expect PLTK’s Q1 revenues to grow 6.66% YoY to $681.45 million.
Comparing Options Market Sentiment
Looking at the May 20th, 2022, option chain for SKLZ and PLTK, we can determine options market sentiment by comparing the calls/puts ratio. In SKLZ's instance, the open calls/open puts ratio at the $5.00 strike price comes in at 1.05x, implying a neutral options market sentiment. When it comes to PLTK, the open calls/open puts ratio at the $20.00 strike price is 1.61x, showing a bullish market sentiment.
The Bottom Line
In my opinion, Playtika is the clear winner at the moment. Playtika's management intends to increase shareholders' value through strategic alternatives that could act as a solid growth catalyst for its stock. In addition, Playtika delivered a relatively better fourth-quarter report, while its forward growth rates look superior as well.
SKLZ shares rose $0.04 (+1.35%) in premarket trading Wednesday. Year-to-date, SKLZ has declined -59.54%, versus a -9.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
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