What happened

Playstudios (NASDAQ:MYPS) shareholders lost ground to a rallying market last month. The stock sank 24% in August compared to 3% spike in the S&P 500, according to data provided by S&P Global Market Intelligence.

The decline put the recently public stock down more than 40% since its listing and was driven by its Q2 earnings update.

Person celebrates while playing a game on their smartphone.

Image source: Getty Images.

So what

The casual gaming specialist reported a sales slump for the period that ended in late June. Revenue dropped 10% to $71 million, although management chose to highlight the company's 6% growth over the first half of the fiscal year compared to the same period a year earlier. "The first half of 2021 was quite eventful," CEO Andrew Pascal said in a press release, "positioning the company for future growth."

Among the key growth drivers Playstudios sees is the recent launch of its myVEGAS Bingo title and an upcoming role-playing game release.

And the company has raised capital, in part through its IPO, to fund additional franchise acquisitions. But Wall Street didn't like the revenue declines or the losses that Playstudios reported last month.

Now what

The losses won't be helped by the tough digital advertising environment that's been pushing rates higher for all industry players. Playstudios doesn't yet have a robust enough portfolio to keep sales steadily rising, either. But those risks are all to be expected for a young company that's at the initial stages of its growth plan.

Look for further swings in the stock over the next few quarters as management tries to construct a growing, profitable business. For now, there's no hard data to show it is moving in that direction as of yet.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.