Embracer Group (Buy, TP: SEK50.00) - Needs to level up
We reiterate our BUY, but with a sharply lowered target price of SEK50 (100) following Embracer missing out on a potential ‘ground-breaking strategic partnership’ and the ensuing >30% cut of its 2023/24 adj. EBIT guidance. We have reduced our earnings forecasts significantly and applied a more cautious target multiple (10% FCF yield). Management is left with a heavy burden of proof, but even with an FCF forecast below its target, we believe minor cash flow improvements should support the stock.Embracer Group AB, formerly THQ Nordic AB is a Sweden-based company engaged in the computer games development. The Company focuses on acquiring, developing and publishing personal computer (PC) and console games for Xbox and PlayStation platforms. The Company's game portfolio consists of owned franchises intellectual property (IP) and published titles, including Saints Row, Goat Simulator, Dead Island, Darksiders, Metro, MX vs ATV, Kingdoms of Amalur, TimeSplitters, Satisfactory and Wreckfest, among others. It offers games through various distribution channels, including digital platforms, such as Steam, PlayStation Store and Xbox Live, as well as gaming conventions, and global retailers, such as Walmart, GameStop and Amazon. The Company has around 18 internal game development studios and operates in more than 40 countries.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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