What happened

Shares of mobile game developer Playstudios (MYPS 0.97%) are lower by 13.2% as of 11:30 a.m. EDT today, following the release of lackluster second-quarter results.

So what

For the three-month stretch ending in June, Playstudios turned $70.8 million worth of revenue into a net loss $7 million. It cut the year-ago loss of $13 million nearly in half, but the top line fell from $77.9 million in the second quarter of 2020. The few analysts that follow the $630 million company were anticipating revenue of $72.1 million.

Hand plotting a falling chart on a chalkboard.

Image source: Getty Images.

Now what

Don't read too much into last quarter's misfire, or for that matter, the market's bearish response to it.

This is a young company, and an even younger stock; Playstudios' IPO was only completed in December. Like many other start-ups being taken public, early investors and insiders appear to be taking profits and/or backing out of purchases mostly prompted by unmerited euphoria linked to something new. Thursday's selling is just an extension of selling that began in earnest in mid-June. Indeed, today's drubbing may ultimately be a much-needed capitulation.

On the other hand, don't be too quick to jump to that conclusion and then jump into the stock.

Thursday's plunge may well be a big washout of a lingering overhang of supply of the stock, but that doesn't inherently mean a recovery is on the offing. This company is still very much in the start-up stage, acknowledging plans to spend money on mergers and acquisitions without having yet proven it can make, publish, and promote a must-play casual/mobile game. The risk remains tremendous.