Video games creator and publisher Frontier Developments (FDEV:AIM) believes current year sales could weigh in towards the upper end of market expectations. The company is drawing confidence from the early success of its third game franchise, Jurassic World Evolution.
Having fallen back from all-time highs on nervousness over the game’s performance, the shares surge 130p or 9.5% higher to £14.95 as analysts push through material upgrades to forecasts for the year ending 31 May 2019.
JURASSIC SALES JOLT
The company launched its hotly-anticipated new title Jurassic World Evolution on 12 June to coincide with the cinema release of Jurassic World: Fallen Kingdom.
In a positive trading update, Cambridge-based Frontier cheers with the news digital sales of the game have been strong across all three platforms (PC, PlayStation 4 and Xbox One), while physical discs are available from today for the Playstation 4 and Xbox One.
Buoyed by the initial sales performance of Jurassic World Evolution, seeing strong demand from the USA and China in particular, Frontier upgrades year to May 2019 guidance.
‘Although it’s very early in terms of both Frontier’s financial year and the life-cycle of Jurassic World Evolution, current board projections indicate that Frontier could achieve total revenue for the year ending 31 May 2019 towards the upper end of the current market analyst range (of £58m to £88m),’ thunders Frontier Developments.
Significantly, the upgrade is based on forecasts for Jurassic World Evolution, together with the expected performance of Frontier’s first two franchises, Elite Dangerous and Planet Coaster.
‘We are pleased with the positive reaction we have seen to the launch of Jurassic World Evolution and its initial sales performance,’ enthuses CEO David Braben. He also teases: ‘We already have future franchises in different phases of internal development and we will continue to explore other models to accelerate our scale-up.’
MONSTER UPGRADES
‘Only three weeks after the digital launch of Jurassic World Evolution - and on the day of its release on disc - it is revealed that the game has “hit” potential, with strong initial digital sales across PCs and consoles,’ explains FinnCap number cruncher Lorne Daniel.
With a £17.50 price target for the stock, Daniel lifts his full year 2019 revenue forecast substantially, from £58.0m to £75.3m, while his adjusted profit before tax (PBT) forecast rises from £15.3m to £16.5m accordingly.
Daniel does however caution: ‘This is an early stage in the year and there is room for further upside with some sales forecasts nearing £90m however we remain prudent in our outlook only a few weeks post launch.’
‘The final full year 2019 profit outcome is clearly heavily geared into Jurassic World Evolution’s success and investors will continue to focus on the franchise through this year. But the bigger prize is the delivery of a multi-franchise gaming strategy and £100m plus of annual revenues,’ adds Liberum, pointing out that within the industry, Frontier is viewed as a world class games publisher.
The company’s credentials have not gone unnoticed. Last summer, Chinese internet-to-interactive entertainment titan Tencent invested £17.7m in Frontier in return for a 9% stake, to enable the business to not only attack the gargantuan Chinese market but also to scale-up by increasing the frequency of major releases.
