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Martin Arnell
  • Martin Arnell

Kambi (Buy, TP: SEK180.00) - Preparing for more action

We reiterate our BUY and SEK180 target price, and expect Q1 to show Kambi is on track to meet its 2024 revenue and EBIT guidance. The near-term outlook is positive in our opinion (key sports events like UEFA Euro 2024, and onboarding new key customers), and a new CEO should be announced soon. We have raised our 2024e EBIT by 3%, and expect more clarity on future potential buybacks (new framework to be put to the AGM).

Martin Arnell
  • Martin Arnell

Evolution (Buy, TP: SEK1700.00) - Q1e revenue of EUR500m

We reiterate our BUY and SEK1,700 target price ahead of the Q1 results (due at 07:30 CET on 24 April). We see re-rating potential from e.g. stabilising Live revenue growth YOY (c25% YOY in Q1e at constant currency), confirmed by our proprietary tracker data, and an improving cash distribution story. Notable upcoming new Live game releases include ‘Lightning Storm’, which we believe is scheduled for late Q2.

Martin Arnell
  • Martin Arnell

Evolution (Buy, TP: SEK1700.00) - Flagging a trend shift

After two years of slowing growth in Live revenue and daily players (from very high levels), we see more encouraging trends YTD. According to our tracker, Evolution’s total daily average players are up 15% QOQ QTD (2–3% in Q3–Q4 2023), while YOY growth has stabilised at >30%. Our data also suggests that Evolution has maintained its superior market share, which, overall, increases our conviction in the growth outlook. We reiterate our BUY and SEK1,700 target price.

Martin Arnell
  • Martin Arnell

Viaplay Group (Sell, TP: SEK0.95) - Low conviction in its story

Following the Q4 results (2023 FCF of SEK-3.5bn) and completion of the recapitalisation in February 2024 (SEK4bn equity raise), we have cut our target price to SEK0.95 (previous ‘post-money’ target price SEK1.30, equivalent to SEK5.30 ‘pre-money’) and reiterate our SELL. We believe the retransformation remains associated with fairly high risk (2026e net debt of >2bn) and restoring investor confidence will be challenging.

Martin Arnell
  • Martin Arnell

Kambi (Buy, TP: SEK180.00) - Succession in the making

We have cut our 2024e adj. EPS by c30% reflecting Kambi’s cautious revenue guidance, partly explained by the less-attractive terms in the contract extension with Kindred. Consequently, we have cut our target price to SEK180 (235) but reiterate our BUY ahead of the CEO change, re-based consensus, a healthy customer pipeline, intact structural tailwind, and as we remain optimistic on earnings growth in the forecast period.

Martin Arnell
  • Martin Arnell

Betsson (Buy, TP: SEK155.00) - Follow the cash generation

We reiterate our BUY and SEK155 target price after fine-tuning our 2024–2025e EPS, following the in-line Q4 results. Despite a lower than usual sports margin YTD and continued sharp negative FX, 2024 started with revenue up 6% YOY. Looking ahead, we expect more healthy shareholder distributions and further potential for bolt-on acquisitions, supporting the strategic ambition of profitable growth through geographic expansion.

Martin Arnell
  • Martin Arnell

Embracer Group (Buy, TP: SEK38.00) - Stormy but in a better position

We have lowered our target price to SEK38 (43) after a 9% cut to our 2024/25e group EBIT (weaker than expected PC/Console delivery and near-term outlook), but reiterate our BUY as we expect better FCF and still see a high probability of a potential divestment, which should improve the balance sheet materially. We acknowledge the low investor confidence, but believe the company is in better shape after the restructuring.

Martin Arnell
  • Martin Arnell

MTG (Buy, TP: SEK110.00) - Well-positioned for 2024

We reiterate our BUY and have increased our target price to SEK110 (105) after raising our 2024–2025e adj. EPS by 4–3%, and our strengthened conviction in the profitable growth outlook. The market recovery has started, which together with a healthy new games pipeline for 2024 should underpin group organic revenue growth for the year as MTG continues to meet its targets.

Martin Arnell
  • Martin Arnell

Stillfront Group (Buy, TP: SEK23.00) - Edging closer to growth

We believe the miss on Q4 earnings was more than offset by a return to organic growth YOY in November and December. Our 2024e sales and EBIT are mostly unchanged, and we are encouraged by Stillfront’s and peers’ comments on the improving mobile gaming market. We reiterate our BUY and SEK23 target price ahead of a 2024e with a return to organic growth and FCF alleviating balance sheet concerns.

Martin Arnell
  • Martin Arnell

Paradox Interactive (Buy, TP: SEK280.00) - Set for strong 2024e earnin...

We reiterate our BUY and SEK280 target price following Q4’s strong top line but earnings hampered by the pre-announced SEK171m writedown of ‘Lamplighters League’. We have raised our 2024e sales by 5% and EBIT by 2%, with FX gains slightly offset by lower gross margin expectations. Continued ‘Cities: Skylines 2’ sales and multiple new releases in 2024e drive our forecast EBITDA growth of 25% YOY.

Martin Arnell
  • Martin Arnell

Evolution (Buy, TP: SEK1700.00) - Stabilising Live growth is promising

In light of healthier Live revenue growth trends than we expected, promising signs of stabilising Live revenue growth YOY, and intact estimates, we have raised our target price to SEK1,700 and reiterate our BUY. In our view, more successful expansion (new studios and step-up in recruitment), new games development, and potential re-regulation in key markets (e.g. the US, Latin America) increase the likelihood of a re-rating this year.

Martin Arnell
  • Martin Arnell

Kambi (Buy, TP: SEK235.00) - An eventful year ahead

We reiterate our BUY but have lowered our target price to SEK235 (250) after cutting our 2024 adj. EPS by 8%. We expect soft Q4 earnings, burdened by player-friendly results (sports margin) and a high drop through. However, the 2024 outlook remains positive, with key sport events and contributions from new key clients. The negatives are more than discounted, we believe.

Martin Arnell
  • Martin Arnell

Embracer Group (Buy, TP: SEK43.00) - Closing in on FCF delivery

We see a good potential that Embracer will achieve key catalysts: Q3–Q4e adj. EBIT of SEK2.2bn–1.8bn; more FCF improvements; and potential divestments to strengthen the balance sheet. We have reduced our 2023/24e EPS by 3% and cut our target price to SEK43 (45), but reiterate our BUY, expecting Tabletop and Mobile to be healthy in Q3. Also, we believe an improved back catalogue and release schedule bodes well for PC/Console in Q4.

Martin Arnell
  • Martin Arnell

Stillfront Group (Buy, TP: SEK23.00) - Reassurance in cash flow

We reiterate our BUY but have cut our target price to SEK23 (25) ahead of the Q4 results (due at 07:00 CET on 7 February). We have reduced our 2024e adj. EBIT by 10%, mainly to reflect recent FX movements and marginally higher cost assumptions. That said, we view concerns about Stillfront’s balance sheet as exaggerated and find reassurance from the FCF stream.

Martin Arnell
  • Martin Arnell

Betsson (Buy, TP: SEK155.00) - In good shape with strong dividend

We reiterate our BUY, but with a lowered target price of SEK155 (160) reflecting a 2% cut to our 2023–2024e EPS based on a lower Q4 EBIT forecast and negative FX. In a wider perspective, Q4 still looks like a healthy quarter (EBIT +40% YOY); we see an upbeat picture for 2024, with growth opportunities from e.g. UEFA EURO and CONMEBOL Copa America; and we expect a proposed 2023 DPS of SEK7.60 (up >50% YOY), equalling an attractive 7% dividend yield.

Martin Arnell
  • Martin Arnell

MTG (Buy, TP: SEK105.00) - Entering 2024 on a high note

We expect MTG to achieve its organic revenue growth target, implying c6% organic growth YOY for Q4e, driven primarily by continued strong performance from PlaySimple and Ninja Kiwi. We have made only minor adjustments to our 2024e sales and adj. EBITDA, with a negative FX effect mostly mitigated by the consolidation of the acquisition of Snowprint Studios. We reiterate our BUY and SEK105 target price ahead of the Q4 report, due at 07:30 CET on 8 February.

Martin Arnell
  • Martin Arnell

Paradox Interactive (Buy, TP: SEK280.00) - Strong potential in 2024e

We expect strong Q4 revenue, with the release of ‘Cities: Skylines 2’ (CS2) for PC and numerous DLCs, but with earnings hampered by the writedown of ‘Lamplighters League’. We have cut our Q4e EBIT on the somewhat underwhelming start to CS2, and reduced our 2024e EBIT by 5% mainly to reflect FX movements. We maintain our BUY, but have slightly lowered our target price to SEK280 (285).

Martin Arnell
  • Martin Arnell

Kindred Group (Buy, TP: SEK145.00) - We believe the pressure is health...

We expect sizeable Q4 earnings growth (adj. EBITDA up >35% YOY) thanks to easy comparables and stricter cost control. We are attracted to the possible key upcoming catalysts: 1) a potential business combination with a third party (based on the board’s communication); and/or 2) interim management pushing hard to maximise 2024e earnings (ambition of 25% adj. EBITDA growth YOY). We reiterate our BUY and SEK145 target price.

Martin Arnell
  • Martin Arnell

Evolution (Buy, TP: SEK1640.00) - Needs to stabilise the Live growth

We expect Q4 Live revenue to be up 20% YOY with a 70.2% EBITDA margin, with stepped-up recruitment to face the rising demand. Next, management needs to prove that the Live revenue growth can stabilise and not decelerate more in 2024. With a credible plan, structural growth tailwind, market leadership, sizeable expansion and continued focus on the expansion of Live games, we reiterate our BUY and SEK1,640 target price.

Martin Arnell
  • Martin Arnell

Viaplay Group (Sell, TP: SEK5.30) - Upcoming SEK4bn equity injection

After tough consumer trends, content cost inflation, a focus on volumes over value and failure of its international expansion (partly financed by a SEK4bn equity raise in early 2021), Viaplay announced a recapitalisation plan including a SEK4bn equity injection at SEK1/share with 4.5bn new shares (EGM on 10 January). We have cut our target price to SEK5.3 (equivalent to ‘post-money’ SEK1.3; our previous target price was SEK30) and downgraded to SELL (HOLD).

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