Berenberg raises target price on Frontier Developments
Analysts at Berenberg hiked their target price on video game business from 170.0p to 300.0p on Wednesday, stating the group's strategy was "showing signs of promise".
Berenberg said its 'hold' recommendation on Frontier Developments wass premised on low return on investment on new titles, something the group was looking to address through a strategy to focus on creative management simulation titles and better cost control.
"The company's trading update on 7 May provided early signs that the strategy should pay off," said Berenberg. "While the better-than-expected net cash position removes the balance sheet risk, with the valuation at a premium to peers and the next major catalyst not until the release of the next CMS title in November, the shares are likely to lack direction, in our view."
The German bank stated that in order for it to turn more positive on the shares it must await details and data on Frontier's upcoming CMS title.
"Following the trading update, we update estimates and our price target increases to 300.0p accordingly. The shares trade on FY26 EV/sales of 1.0x and EV/EBIT of 24.4x, on our estimates, which is a premium to other UK publishers."
Reporting by Iain Gilbert at Sharecast.com
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