Berenberg Bank Downgrades Frontier Developments Rating to Hold
January 17, 2023
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The company is best known for its Elite series of games, which includes Elite Dangerous and Planet Coaster, as well as its Jurassic World Evolution series. Recently, Berenberg Bank has downgraded Frontier Developments ($LSE:FDEV)’ rating from Buy to Hold. This follows a period of stagnation in the company’s stock price, with shares trading at around the same price they were when the company went public. Berenberg Bank believes that the current share price does not reflect the potential of the company and that there could be upside if the company can deliver on its growth plans. The downgrade by Berenberg Bank is likely to impact investor sentiment towards Frontier Developments, as many investors may now be more wary of investing in the company.
However, some analysts believe that the downgrade may present an opportunity for long-term investors, as the stock is now more attractive from a valuation perspective. Overall, Frontier Developments remains an interesting stock to watch as it continues to grow and develop new games and IPs. The company has a strong track record in creating innovative and successful titles, and investors will be hoping that these successes will continue going forward. Despite the recent downgrade, Frontier Developments remains an attractive investment option for those willing to take the risk.
Price History
At the time of writing, media sentiment on the stock is mostly negative. On Monday, FRONTIER DEVELOPMENTS stock opened at £4.5 and closed at £5.1, representing a 13.2% increase from its prior closing price of 4.5. The downgrade by Berenberg Bank reflects a cautious view of the stock’s prospects in the near term. The bank noted that while FRONTIER DEVELOPMENTS has made progress in its business development, the stock’s valuation is already at a premium relative to its peers. As such, Berenberg believes that the stock is likely to remain range-bound in the short term.
In addition, the analyst noted that there is an element of risk associated with the company’s reliance on a single game for most of its revenue. The analyst also raised concerns about the company’s ability to sustain its growth trajectory in the long term, given its relatively small size and limited resources. Despite the downgrade, some investors remain bullish on the stock. They point to FRONTIER DEVELOPMENTS’ strong fundamentals and growth prospects, including its foothold in the lucrative gaming industry. As such, some investors believe that the stock could still be attractive for those willing to take a long-term view. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Frontier Developments. More…
| Total Revenues | Net Income | Net Margin |
| 114.03 | 9.63 | 8.4% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Frontier Developments. More…
| Operations | Investing | Financing |
| 41.16 | -38.69 | -6.17 |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Frontier Developments. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 169.58 | 51.21 | 3 |
Key Ratios Snapshot
Some of the financial key ratios for Frontier Developments are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 8.3% | -57.0% | 1.3% |
| FCF Margin | ROE | ROA |
| 2.1% | 0.8% | 0.6% |
VI Analysis
FRONTIER DEVELOPMENTS is a company with strong fundamentals that reflect its long term potential. Using the VI Star Chart, the company has a high health score of 8 out of 10 with regards to cashflows and debt, indicating that it is capable of paying off debt and funding future operations. It is classified as a ‘rhino’, which is a type of company that has achieved moderate revenue or earnings growth. In terms of specific performance metrics, FRONTIER DEVELOPMENTS is strong in terms of both growth and profitability, and medium in terms of asset strength. However, the company is weak in terms of dividend performance. With its solid fundamentals and moderate growth, the company could be an attractive investment option for investors looking for opportunities with strong long-term potential. Investors looking for companies with strong long-term potential may find FRONTIER DEVELOPMENTS an interesting option. With its high health score and solid fundamentals, the company could become an increasingly attractive investment in the years to come. Moreover, its moderate growth rate could be an advantage for investors looking for stability in their investments. As such, investors who are looking for a strong and stable long-term investment may find FRONTIER DEVELOPMENTS an attractive option. More…
VI Peers
It has a large catalogue of titles and is renowned for its innovative and award-winning games. The company competes with other major developers such as Remedy Entertainment PLC, Fun Yours Technology Co Ltd, and TinyBuild Inc. These companies have established their own unique presence in the gaming industry, providing consumers with a variety of entertainment experiences.
– Remedy Entertainment PLC ($OTCPK:RMDEF)
Remedy Entertainment PLC is a Finnish video game developer and publisher based in Helsinki, Finland. Founded in 1995, the company is best known for developing the Max Payne franchise as well as Alan Wake and Quantum Break. As of 2022, Remedy Entertainment PLC has a market capitalisation of 308.37M and a Return on Equity (ROE) of 10.74%. This market cap represents the total value of the company’s outstanding shares and demonstrates the company’s financial health. The higher the ROE, the more profitable the company is – 10.74% indicates that Remedy Entertainment PLC is doing well financially.
– Fun Yours Technology Co Ltd ($TPEX:6482)
Fun Yours Technology Co Ltd is a multinational technology company that specializes in providing innovative solutions to the consumer market. The company has an impressive market cap of 803.57M as of 2022, making it one of the largest technology companies in the world. Its Return on Equity (ROE) of 15.32% is also quite impressive and shows that the company is a safe investment for investors. The company’s focus on innovation and customer service has allowed it to thrive in the highly competitive technology market.
– TinyBuild Inc ($LSE:TBLD)
TinyBuild Inc is a game development and publishing company based in Seattle, Washington. The company develops and publishes indie titles for PC, consoles and mobile platforms. Since its founding in 2011, TinyBuild has released over 60 titles, including SpeedRunners, Party Hard and Hello Neighbor. As of 2022, TinyBuild Inc has a market capitalization of 228.31M, making it one of the largest independent game publishing companies in the world. Additionally, the company has achieved a Return on Equity (ROE) of 11.68%, indicating that shareholders are receiving an adequate return on their investments.
Summary
Frontier Developments is a British video game developer and publisher. Recently Berenberg Bank downgraded their rating to Hold, causing media sentiment to be mostly negative. Despite this, the stock price for the company moved up the same day, indicating that investors may be unconcerned about the downgrade.
Analysts suggest that investors should still exercise caution when considering investing in Frontier Developments due to the potential risks associated with their market and the current uncertainty around their future prospects. As always, investors should thoroughly research the company and its financials before making any decisions.
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