Why Nazara Technologies Share Price is Falling

Over the past year, most new-age tech companies have been making headlines for the sharp correction in their share prices. Among them is Nazara Technologies.

Share price of Nazara Technologies have been under pressure since the beginning of 2022. This was due to a series of events, including the RBI prohibiting new client onboarding and higher valuations.

The stock further fell due to the Russia-Ukraine war and the general sell-off in the market earlier this year.

The stock is now down by 35% in 2022.

So, what are the reasons for the further decline?

Let's take a look.

#1 Sky-high valuations

The company shares have been trading at a higher valuation since its IPO (initial public offering). At the time of the IPO, the stock was trading at nearly 8x its IPO price.

Post listing, the shares traded close to 12 times their intrinsic value.

At present, the company's shares are trading at a PE (price to earning) multiple of 99.8 x and PBV (price to book value) ratio of 4.4x. The PE multiple is higher than the industry PE multiple of 26.3x.

From an investment perspective, value investors usually refrain from trading the shares of such companies. The overvalued stock price makes the company prone to market risk.

#2 Profit booking

Shares of the company also witnessed profit booking as investors liquidated their shares for cash.

In the last three days shares of Nazara Tech have gained 21% since the company announced the acquisition of leading US children's interactive entertainment company WildWorks.

A sharp rally was seen in the stock after the consecutive downfall since March 2022. As a result, investors booked profits. A huge volume of shares changed hands, amounting to Rs 223.2 m.

#3 New-age stocks facing sell-off

The looming wave of inflation and the corresponding increase in interest rates have raised concerns about the business model of start-ups.

Earlier capital to fund losses was cheap and available. Now that's history. Companies need to become profitable fast.

Investors are currently assigning lower valuations for companies that could generate cash flows sometime in the future, dimming their appetite for them.

How Nazara Technologies shares have performed recently

Over the week, the shares are trading higher by 16%.

So far in 2022, the stock is down by 36%. Over the year, shares of the company are down by 20%.

The company touched its 52-week high of Rs 1,687 on 11 October 2021 and its 52-week low of Rs 475.1 on 22 June 2022.

About Nazara Technologies

Nazara Technologies is an Indian gaming and sports media platform. It has a presence in India, North America, Africa, and the Middle East.

Its product portfolio includes offerings across interactive gaming, eSports, and gamified early learning ecosystems.

This includes the world cricket championship & carrom clash in mobile games, Kiddopia in gamified early learning, Nodwin & SportsKeeda in eSports, fantasy and many more.

The company is widely known for its games, Chhota Bheem and Motu Patlu series.

The company derives revenues mainly from subscription fees paid by users for accessing gamified early learning content and from the eSports business.

To know more about the company, check out Nazara Technologies factsheet and quarterly results.

As gaming stocks interest you, check out Top 4 gaming stocks in India to add to your watchlist.

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...