Double Down Interactive.
Online gambling addiction.
"It's about making them play as long as possible. The more they play, the more they lose. And in the end, we take it all."
Robert De Niro in Casino.
DOUBLE DOWN INTERACTIVE
Ticker: DDI
It's a small but well-funded company, worth around 750 million. Based in South Korea. I've heard that starting a company isn't exactly encouraged in North Korea.
The office culture is very startup-like, with a Korean twist. Think team-building activities, free snacks, nap pods, and an on-site gym. Yes, the kind of things you'll never find at your company.
They develop online gambling games, catering to the most serious gamblers.
DoubleU Games Co. bought them out in 2017 for about 825 million. I wonder if the person who did the due diligence is still employed.
FUNDAMENTAL
The stock price has been skyrocketing over the past year, although with very high volatility. If you want a calm portfolio, this is not your company.
The company is very cheap. Not even Paramés could resist a P/E of 6.
They issued shares in 2021, obviously for the IPO. It was time to cash in. They haven't done it again. Good for the Koreans.
DoubleDown is very solvent. A debt of 43M vs. cash and equivalents of 342M.
Sales per employee are very good. It pays off to hire people. Returns on capital above average. Excellent margins.
Earnings per share experienced a decline in 2022; however, a positive trend emerged in 2023.
Double Down has been significantly improving EPS forecasts over the past year. Sales, on the other hand, have been in line with expectations or slightly better.
TECHNICAL
Technical analysis is all about identifying patterns. If a lot of other people see the same pattern, you're more likely to be successful. Also, sometimes, things can go the other way.
I'm seeing a rounded bottom here. It's also broken through the previous year's highs, even though it's still below the 2021 IPO price.
Entry strategy? Perhaps buying at the 30-day SMA, which it seems to tend to return to, could be an option.
CYCLES
Before opening the program, I saw that, based on cycles, it's better to wait. This one was easy.
We have a potential drop in mid-October, followed by a possible rise at the end of November.
INDUSTRY
Is the trend for online gambling going up or down?
Without checking anything, I'd say the future looks excellent.
Millions of people glued to their phones all day. Dumbed down to the extreme. Addicted to cheap dopamine. University degrees practically given away. The average IQ has been plummeting since 2006.
After reviewing several reports, it seems the industry's growth rate is 12% annually. By 2030, the online gambling industry could reach over $153 billion.
Answer: Up.
CONCLUSION AND SOME DATA
Good key performance indicators from the annual report.
They're talking big about expanding. Or maybe they just have a fancy chart to convince us.
The sales declines in 2022 and 2023 are a red flag.
Could it happen again?
As COVID restrictions eased in 2022, people spent less time gaming. Inflation and economic worries likely reduced gambling spending. 'Just two chips tonight, folks!'
Active users dropped 22% in 2023, hurting revenue. But spending per player rose as addicts gambled more.
DoubleDown faced big costs from the Benson lawsuit and goodwill impairment, totaling 412M.
But I'll be honest. What has disturbed me most about this company is its employees. They all look the same. Clones in a childish version of Squid Game. I don't see the spirit of Steve Jobs running through their veins.
I would conclude that, even though their employees are a bunch of oriental freaks, the company is doing things right. It has excellent fundamentals and the business looks set to improve due to the tailwinds we've seen above.
DoubleDown could be a major player in the near future. We're adding it to the portfolio.
And that's the end of the article. If you liked it, and you're feeling generous, share it with others.
Cheers.
Industry’s future HERE, HERE y HERE.
Last annual report (2024) HERE.
Double Down website HERE.
Benson trial HERE.
CI down HERE.