COVID-19 has affected Flexion’s revenues positively on the relative upswing in mobile gaming. We argue that this boost also will have positive long-term effects, as developers have used this demand spike to try alternative ways of distribution. This is evident in the recent momentum in new game signings that Flexion has experienced. Many of those new games have also been from developers with whom Flexion has an existing partnership, strengthening the value-add proposition in its offer. Because of the momentum in new game signings, Flexion has raised its yearly target to 27 (23) live games by the end of the year. We raise our sales estimates by 2% for 2021e and move EBIT break-even forward, resulting in a long-term upgrade on EBIT of 11% for ‘22e.
More fragmentation for target market expected
The summer saw Epic Games file lawsuits against Apple and Google for anticompetitive behaviour with store fees. In addition, the US decided to ban TikTok and WeChat. What this will lead to in the end is unclear, but a likely outcome is that the market will be more fragmented than before, which will be positive for Flexion. We raise our DCF valuation range to SEK 12-20 (11-19) following the report.
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