PlayStudios (MYPS)

Digital casino game platform PlayStudios (NASDAQ:MYPS) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 19.1% year on year to $57.65 million. Its GAAP loss of $0.07 per share was significantly below analysts’ consensus estimates.

Company Overview

Founded by a team of former gaming industry executives, PlayStudios (NASDAQ:MYPS) offers free-to-play digital casino games.

Gaming solution companies operate in a dynamic and evolving market, and the digital transformation of the gaming industry presents significant opportunities for innovation and growth, whether it be immersive slot machine terminals or mobile sports betting. However, the gaming solution industry is not without its challenges. Regulatory compliance is a crucial consideration as companies must navigate a complex and often fragmented regulatory landscape across different jurisdictions. Changes in regulations can impact product offerings, operational practices, and market access, requiring companies to maintain flexibility and adaptability in their business strategies. Additionally, the competitive nature of the industry necessitates continuous investment in research and development to stay ahead of competitors and meet evolving consumer demands.

Competitors offering casual digital games that may feature casino-like activities include Skillz (NYSE:SKLZ), SciPlay (NASDAQ:SCPL), and Huuuge (WSE:HUG).

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. PlayStudios struggled to consistently generate demand over the last five years as its sales dropped at a 1.2% annual rate. This was below our standards and is a sign of poor business quality.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. PlayStudios’s recent performance shows its demand remained suppressed as its revenue has declined by 11.1% annually over the last two years.

This quarter, PlayStudios missed Wall Street’s estimates and reported a rather uninspiring 19.1% year-on-year revenue decline, generating $57.65 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 2.1% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

PlayStudios’s operating margin has been trending down over the last 12 months and averaged negative 9.1% over the last two years. Unprofitable consumer discretionary companies with falling margins deserve extra scrutiny because they’re spending loads of money to stay relevant, an unsustainable practice.

In Q3, PlayStudios generated a negative 13.6% operating margin. The company's consistent lack of profits raise a flag.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for PlayStudios, its EPS declined by 26.2% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

In Q3, PlayStudios reported EPS of negative $0.07, down from negative $0.02 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects PlayStudios to improve its earnings losses. Analysts forecast its full-year EPS of negative $0.29 will advance to negative $0.06.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

PlayStudios has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.8% over the last two years, better than the broader consumer discretionary sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

PlayStudios’s five-year average ROIC was negative 10.4%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

PlayStudios is a well-capitalized company with $106.3 million of cash and $8.65 million of debt on its balance sheet. This $97.67 million net cash position is 94.1% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results. Its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 14.6% to $0.77 immediately after reporting.

Updated: November 14, 2025 at 9:38 PM EST

Before making an investment decision, investors should account for PlayStudios’s business fundamentals and valuation in addition to what happened in the latest quarter.

PlayStudios doesn’t pass our quality test. To begin with, its revenue has declined over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion, the downside is its number of daily active users has disappointed. On top of that, its negative EPS four years ago gives us pause.

PlayStudios’s EV-to-EBITDA ratio based on the next 12 months is 2.7x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $1.75 on the company (compared to the current share price of $0.69).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.