Rolling The Dice On DoubleDown Interactive: Analyst Forecasts Impressive Revenue Growth And Cost Discipline

Wedbush analyst Nick McKay initiated coverage on DoubleDown Interactive Co Ltd DDI with an Outperform rating and a $12.25 price target.
The analyst said the price target reflected a roughly 3.0x enterprise value-to-adjusted EBITDA multiple applied to FY25 estimate of $120 million.
The company should be able to generate revenues of at least $300 million annually in future years, with room for meaningful growth from an eventual economic rebound, improving advertising technology, the layering in of SuprNation, and the addition of new games, noted the analyst.
The analyst also added that the adjusted EBITDA should expand accordingly based upon the company’s track record of cost discipline and margin consistency, with room for significant upside should platform fees drop materially from 30%.
DoubleDown may not be the fastest grower in the video game space in future years, nor the most profitable, but $320 million of revenue and $100 million of adjusted EBITDA in a challenging FY-22 suggest a stock that is being too heavily discounted at present, said the analyst.
The analyst also expects some level of investor skepticism around the viability of a business so heavily tied towards the performance of one game, DoubleDown Casino, in a competitive market.
The analyst notes questions around the morality and legality of social casino gaming as factors to consider.
The analyst regards DoubleDown’s low share trading volume as keeping many investors away, with three entities holding 95.7% of the shares.
The company expects one or more follow-on offerings over the next several years.
Price Action: DDI shares are trading higher by 3.90% at $8.00 on the last check Tuesday.

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