LAS VEGAS - PLAYSTUDIOS, Inc. (NASDAQ: MYPS), a developer of free-to-play mobile games, announced today its agreement to repurchase 11,677,398 shares of its Class A common stock from Microsoft Corporation (NASDAQ:MSFT). The transaction, involving shares valued at $2.11 each, will be financed through PLAYSTUDIOS' available cash, totaling $24.6 million.
This strategic buyback will reduce the company's outstanding common stock by approximately 8.6%, a move that Chairman and CEO Andrew Pascal believes underscores the company's dedication to enhancing shareholder value. Pascal stated, "Purchasing the shares held by Microsoft is a further example of this as we were able to efficiently repurchase 8.6% of our outstanding common stock at a discount to current market prices."
PLAYSTUDIOS is known for its playAWARDS loyalty platform and a portfolio of popular mobile games such as Tetris® mobile app and various casino-style offerings like myVEGAS Slots and myKONAMI Slots. The company's business model allows players to earn real-world rewards through partnerships with hospitality and entertainment brands such as MGM Resorts (NYSE:MGM) International and Norwegian Cruise Line (NYSE:NCLH).
This repurchase agreement with Microsoft represents a significant financial maneuver for PLAYSTUDIOS, as it navigates the competitive landscape of the gaming industry. The transaction is expected to be accretive to the company's earnings per share by decreasing the number of shares outstanding.
In other recent news, PLAYSTUDIOS reported positive Q1 2024 results, surpassing revenue and adjusted EBITDA expectations. The company's growth strategy includes leveraging its loyalty program, launching new products, and exploring mergers and acquisitions. Notable developments include the success of the new Tetris game and the expansion of the Brainium portfolio. Financial guidance for 2024 remains steady, with projected revenues of $315-$325 million and adjusted EBITDA of $65-$70 million.
The company also plans to expand its playAWARDS platform and has restarted its share repurchase program. However, PLAYSTUDIOS faces a challenging market for social casinos and changes in mobile marketing due to privacy policy alterations. Despite these challenges, the company is actively engaged in M&A discussions to scale in the social casino market.
InvestingPro Insights
In the wake of PLAYSTUDIOS' announcement to repurchase shares from Microsoft, a deeper dive into the company's financials through InvestingPro provides additional context for investors. Notably, PLAYSTUDIOS holds more cash than debt on its balance sheet, suggesting a solid financial position to support such transactions. Additionally, the company's management has been actively buying back shares, reflecting confidence in the business's prospects and a commitment to shareholder returns.
From a valuation standpoint, PLAYSTUDIOS' market capitalization stands at $308.03 million, and despite a negative P/E ratio of -17.77, the company's gross profit margin impresses at 74.98% for the last twelve months as of Q1 2024. This high margin indicates strong underlying business efficiency despite the competitive pressures in the gaming industry. Moreover, analysts predict that PLAYSTUDIOS will become profitable this year, which could signal a turning point for the company's earnings trajectory.
Investors seeking further insights will find additional InvestingPro Tips that delve into the company's financial health and future outlook. With a total of 8 tips available on InvestingPro, including expectations for net income growth this year and an analysis of the company's liquid assets, interested parties can gain a more comprehensive understanding of PLAYSTUDIOS' potential. For those looking to access these insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Overall, the share repurchase from Microsoft coupled with the company's robust gross profit margin and anticipated return to profitability presents an intriguing picture for investors considering PLAYSTUDIOS' stock in their portfolios.
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