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Why Playstudios Is Down More Than 13% on Thursday

By James Brumley – Aug 12, 2021 at 12:22PM

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The game publisher hasn't picked up much steam despite the pandemic turning millions of consumers into video game fans.

What happened

Shares of mobile game developer Playstudios (MYPS 5.03%) 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.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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