Video games: Jefferies sees slowing growth at unreasonable price

Paradox Interactive AB (publ)

11/12/2020 08:08

** Video games' COVID-19 boost will outlive the pandemic
with better digital margins, larger addressable market, but the
attention in the interactive entertainment sector shifts towards
slowing growth in 2021, Jefferies says
    ** "We find valuations unsustainable as growth generally
slows in 2021," it says, adding the rally looks like "growth at
an unreasonable price"
    ** The brokerage cuts most of the ratings in its coverage on
valuation, citing decelerating growth and relatively higher
valuations of European names
    ** Pan-European stocks have been boosted by more than 100%
year-to-date, Jefferies says, noting smaller names as biggest
beneficiaries who have seen the largest EPS boosts
    ** Jefferies cuts Paradox  PDXI.ST  and Frontier
Developments  FDEV.L  to "hold" from "buy", and CD Projekt
 CDR.WA  and Team17  TM17.L  to "underperform" from "hold"
    ** It keeps "buy" on Ubisoft  UBIP.PA  and Keyword Studios
 KWS.L , given the former's Valhalla-led turnaround after a
tough year and the latter's unique potential for acceleration in
2021
    ** It also keeps "hold" on Sumo  SUMO.L 

 ((joanna.wodzicka@tr.com))