Stillfront Group (Buy, TP: SEK21.00) - Most negatives priced in

Flat organic growth YOY in Q1 did not live up to the market’s expectations (we forecast +2%), and higher-than-expected UAC led to a ~15% miss on adj. EBIT. However, we believe Stillfront has laid the basis for solid earnings growth in Q2–Q3e, when it is set to lower UAC in a recovering mobile gaming market. We reiterate our BUY, but have reduced our target price to SEK21 (23), and see most of the negatives reflected at these levels.

Albion Online Europe launch data

Record investments: desperate or brilliant?

Large investments drove a surprisingly weak margin in Q1, but unclear if they will translate into sustainably higher growth. Reiterate HOLD, TP SEK 11; 7-5x EV/adj. EBIT '24e-'26e.

EBIT down by a third, growth to decelerate

Stillfront Group (Buy, TP: SEK23.00) - In search of organic growth

We expect slight positive organic sales growth (2–3% YOY in Q1–Q2e) to be enough to trigger a share price recovery from today’s depressed levels. Our 2024–2026 forecasts contain sales growth, high margins and solid cash flows, and consequently, we find the markets’ negative view to be excessive. We have left our estimates fairly intact and reiterate our BUY and SEK23 target price ahead of the Q1 report (due at 07:00 CET on 25 April).

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.

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.

Stillfront Group (Buy, TP: SEK25.00) - 2023 looks like a lost year

We reiterate our BUY but have lowered our target price to SEK25 (30), having reduced our 2023–2024e adj. EBITDA by c7%, following the disappointing Q3 results. The projected return to organic growth was once again postponed and is set for 2024. We believe market expectations are at an all-time low, while Stillfront shows signs of underlying cost improvements, somewhat offsetting balance-sheet risks, in our view.

Stillfront Group (Buy, TP: SEK30.00) - Cash flow warrants positive vie...

We reiterate our BUY but have cut our target price to SEK30 (35) ahead of the Q3 results (due at 07:00 CET on 25 October). Although we have postponed our scenario of a return to organic revenue growth YOY (from Q3 to Q4 2023e), we believe the near-term risk continues to ease – confirmed by still-strong cash flow generation (SEK~1bn rolling 12-month FCF). We have lowered our 2023–2024e EBIT by 5%, respectively.

Stillfront Group (Buy, TP: SEK35.00) - Executing on cash flow and prof...

We reiterate our BUY and SEK35 target price, having edged up our 2023–2024e adj. EBITDA by c2% following the solid Q2 results, where Stillfront continued to execute on profitability and cash flow ahead of a potential sustained market recovery in H2. We believe the near-term balance-sheet risk is still easing and find the risk/reward attractive ahead of likely further revenue growth improvement, a margin pick-up, and continued cash flow delivery.

Northern Lights

Stillfront Group (Buy, TP: SEK35.00) - Business as usual in Q2e

We expect -4% organic growth in a quiet Q2 for Stillfront, only fine-tuning our 2023–2024e sales and EBIT in a market awaiting H2 recovery. Our impression is that Stillfront is focusing on the things it can control, such as margins, cash flows, and potentially paying down debt. Our 2024e adj. EBITDAC margin of 26.6% is at the lower end of the company’s target range of 26–29%. We reiterate our BUY and SEK35 target price ahead of the Q2 results, due at 07:00 CET on 21 July.

Stillfront Group (Buy, TP: SEK35.00) - Improving in a tough market

We reiterate our BUY and SEK35 target price, having fine-tuned our 2023–2034e adj. EBIT post the Q1 results (EBITDA up 4% YOY on -5% organic revenue growth). We forecast a return to organic revenue growth in H2, driven by an improved market and company initiatives, as well as increasing FCF as working capital normalises. We continue to view this as an attractive entry point as we expect revenue growth improvement, margin gain (synergy phase) and continued healthy cash flow.

Stillfront Group (Buy, TP: SEK35.00) - Healthy focus on cash flow

We have cut our Q1e EBIT adj. by c4% to better reflect the seasonality in UA spending, but our 2023–2024e sales and EBIT are mostly intact. We forecast Q1 organic sales -5%, outperforming a weak market YOY, which is likely to return to growth in H2e. Near-term, we believe the focus will be on game launches, margins, and cash flow to ease balance sheet concerns.

Stillfront Group (Buy, TP: SEK35.00) - Light at the end of the tunnel

We reiterate our BUY and have raised our target price to SEK35 (33) given mixed Q4 results but signs of reduced balance sheet risk, margin upside potential, and healthy cash flow. We have fine-tuned our forecasts and expect the new ‘synergy phase’ (more focus on efficiency and capital allocation) to drive healthy FCF notwithstanding lower sales growth than in the past. We forecast a return to organic sales growth YOY for H2 and calculate a 2022–2025e adj. EBIT CAGR of 9%.

Stillfront Group (Buy, TP: SEK33.00) - Healthy cash flow to aid recove...

We reiterate our BUY but have lowered our target price to SEK33 (35), reflecting a 5% cut to our 2023e EBIT in a tough market. At the same time, we expect growth to outperform, resilient margins, and cash flow to more than offset an uncertain near-term mobile-games market outlook. We identify signs of resilience and healthy cash flow (easing balance sheet concerns) as the key catalysts ahead. The results are due at 07:00 CET on 15 February.

Sector Fast Comment - US gaming market returned to growth in Oct

Spending on game content (software) +2% y-o-y in Oct Spending on mobile and hardware down y-o-y YTD spending -7%, up from -8% last month

Sector Fast Comment - European gaming market grew 1.5% in October

European gaming software sales +1.5% in October, y-o-y Victoria 3 off to a “strong start” (no. 9 best-seller) Console sales down, likely on tough comps for Switch

Northern Lights

Stillfront Group (Buy, TP: SEK35.00) - Navigating a tougher market

We have cut our 2022–2023e EBIT by 8–18% after the Q3 report. However, Stillfront has returned to organic revenue growth, in a challenging environment, and we expect it to navigate fairly well through a tougher market (2023e OCF growth >10% YOY) on growth investments, e.g. ‘live ops’ and new games, marketing efficiency, and a diversified games portfolio. We reiterate our BUY, but have cut our target price to SEK35 (45).