Shares in fantasy worlds video games developer and publisher Frontier Developments (FDEV) plunged 36% to £15.86 on Monday after the company lowered its full year revenue guidance for a second time.
The latest launch of the firm’s established game Jurassic World Evolution 2 on 9 November across multiple platforms received lower sales from the PC platform segment than expected.
The company said it believed a ‘more crowded release window’ had created a short-term effect with several other highly anticipated titles launching.
Investment director at AJ Bell, Russ Mould commented: ‘Unfortunately, gaming companies have been eager to ride the pandemic-inspired momentum by scrambling to release new titles and so the marketplace has become very crowded just at the time when gamers found they had plenty of new alternatives to keep them busy.’
Revenues from the new game are still expected to overtake the original game over the first year of its release.
Chief executive and founder of the firm David Braben said, ‘Whilst initial sales on PC have been lower than we targeted, the game is already being enjoyed by around half a million players across all platforms and showing very strong critical and player reviews.’
OVER-OPTIMISTIC
However, Jurassic World Evolution 2 was expected to be the biggest contributor to group revenues in the year to 31 May 2022, and consequently the company lowered its full year sales guidance to between £100 million-and-£130 million.
Consensus estimates prior to today’s trading update were for revenues of £140 million, meaning a 18% shortfall at the midpoint of the new range.
Back in June, the company had forecast full-year revenues in the range of £130 million-to-£150 million, prompting a 10% fall in the shares as consensus expectations at the time were around £146 million.
As other companies have discovered to their cost, it is far better to get into the habit of under-promising and over-delivering, leading analysts to upgrade earnings rather than having to cut them.
