DoubleDown Interactive Co., Ltd. DDI is likely to benefit from the SuprNation acquisition, social casino business and strategic investments. Also, the focus on DoubleDown Casino enhancements bodes well. However, elevated expenses and competitive pressures pose concerns.

Factors Driving DDI Stock

DoubleDown's acquisition of SuprNation, an iGaming platform, has opened new growth avenues. In the second quarter of 2024, SuprNation contributed $7.9 million in revenues, exceeding initial expectations. The company has fine-tuned its approach to scaling this business, balancing investment in player acquisition with profitability goals. By leveraging DoubleDown's game development expertise and marketing platform, the company is positioning SuprNation for sustainable growth in key markets such as the U.K. and Sweden.

The success with SuprNation reinforces DoubleDown’s strategy of leveraging core strengths to diversify into new gaming categories with high market potential. Apart from SuprNation, the company is investing in the development of new mobile games, expected to launch in the second half of 2024. It intends to explore expansion opportunities in new markets, both organically and through mergers and acquisitions.

During the second quarter, the social casino business benefited from the initiative to provide players with more options to purchase chips directly from the platform. This shift has significantly contributed to profitability. DDI's strategy remains focused on enhancing the entertainment value of DoubleDown Casino while maintaining discipline in user acquisition and research and development spending to drive profitability and free cash flow.

The company intends to improve DoubleDown Casino by introducing new slot content, optimizing marketing spends and increasing player engagement through real-time value delivery. Additionally, it aims to continue growing direct consumer payments, paving a path for margin enhancements in the upcoming periods.

Shares of DDI have gained 17.7% in the past three months compared with the industry’s growth of 0.1%.

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Concerns for DDI Stock

The company has been bearing the brunt of high expenses for some time. In the second quarter of 2024, operating expenses rose 9% year over year to $52 million. This increase is partly due to the acquisition of SuprNation. The company anticipates expenses to remain elevated for some time.

DoubleDown's business model is heavily reliant on keeping players engaged and converting free users into paying customers. While key performance indicators such as Average Revenue Per Daily Active User and payer conversion rates have improved, sustaining this level of growth may be challenging. The highly competitive gaming landscape, changing consumer preferences and regulatory risks could negatively affect the company's ability to monetize its user base.

DDI’s Zacks Rank and Stocks to Consider

DoubleDown Interactive currently carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the Zacks Consumer Discretionary sector are Norwegian Cruise Line Holdings Ltd. NCLH, Carnival Corporation & plc CCL and Cinemark Holdings, Inc. CNK. NCLH & CCL sport a Zacks Rank #1 (Strong Buy) each, whereas CNK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Norwegian Cruise Line has a trailing four-quarter earnings surprise of 5.7%, on average. The stock has rallied 56.1% in the past year. The Zacks Consensus Estimate for NCLH’s 2024 sales and earnings per share (EPS) calls for growth of 9.9% and 127.1%, respectively, from the year-ago levels.

Carnival has a trailing four-quarter earnings surprise of 318.1%, on average. The stock has surged 63.5% in the past year. The Zacks Consensus Estimate for CCL’s 2025 sales and EPS indicates an increase of 3.6% and 25.5%, respectively, from the year-ago levels.

Cinemark Holdings has a trailing four-quarter earnings surprise of 145.9%, on average. The stock has increased 78.2% in the past year. The Zacks Consensus Estimate for CNK’s 2025 sales and EPS indicates an increase of 11.5% and 29.8%, respectively, from the year-ago levels.

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