'Complacency is the risk' in gaming sector - Jefferies

Devolver Digital

19/07/2022 13:44

** Jefferies says the complacency of considering video games
as a cheap form of entertainment resilient to recession is its
biggest concern for estimates and stock prices as even small
misses would be significant negative surprises
    ** "'Cheap' is also a two-edged sword - if players can
resist monetisation or replay existing games, their savings will
be at the expense of companies' revenue", Jefferies says
    ** Indie games pose a risk as cash flows into their
development, Jefferies says, and also points to Devolver's
 DEVO.L  recent profit warning as possible trigger for more in
the sector, as competition combined with double-digit wage
inflation drives up costs that are, for now, capitalised
 urn:newsml:reuters.com:*:nL4N2Y01ER
    ** Most game makers are H2-weighed, Jefferies says:
"weakness in new game sales and potential early/deeper
discounting may only become visible during the (December)
holiday season and into 2023"
    ** "We see established franchises and hardcore fan bases as
resilient, and scope for wider dispersion amongst new titles,
casual and indie games," it adds
    ** Jefferies prefers "over-punished" names like Ubisoft
 UBIP.PA  or Huuuge Games  HUGP.WA , where risks are best
discounted; Tinybuild Inc.  TBLD.L , Frontier Developments
 FDEV.L  with loyal fanbases, or Keywords Studios  KSW.L  for
long-term through-the-cycle growth and new CEO self-help


 (Reporting by Lina Golovnya and Diana Mandiá)
 ((lina.golovnya@tr.com))