Next Games held its Capital Markets Day on November 25th. The most surprising content was the mid-term (our interpretation 3-5 years) financial targets of achieving annual revenue of EUR 250m and EBITDA and EBIT-margins of over 23% and 18% respectively. Given current financial performance we consider these targets very ambitious. The Stranger Things -game is set to launch in selected markets during the end of the year and Blade Runner Rogue during Q1/2021. Growth expectations are clearly set on the former, while the latter is quite as expected looking to be more of a niche game.
Guidance revised, positive news on profitability
Next Games also revised its guidance for 2020, now expecting revenue of EUR 26-28m and to be EBITDA positive. The revenue guidance is below our previous estimate (EUR 30.7m) but the profitability expectation was a positive surprise. We had assumed a slightly larger contribution of new games and also expect that Our World is continuing to face challenges. We adjust our 2020 revenue and EBITDA estimates to EUR 28m and EUR 1.1m respectively. We expect growth of 80% in 2021 driven primarily by the Stranger Things -game but note that visibility is extremely limited.
SELL with a target price of EUR 1.6 (1.2)
On our estimates Next Games trades at a clear discount to peers on 2021-2022 EV/sales multiples. Risks are however substantial, as 62% of our estimated 2021 revenue stems from not yet published games. On the positive profitability news and increased confidence in a more careful and sustainable scaling approach we raise our TP to EUR 1.6 (1.2), SELL-rating intact.
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