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Jurassic-sized expectations for Frontier Developments
High-flying video games creator Frontier Developments (FDEV:AIM)’s news that revenue and earnings for the year to May 2018 beat market expectations has helped to revive the share price after recent weakness, lifting it 2.8% to £16.60.
However, we note that stockbroker FinnCap didn’t upgrade its earnings forecasts for the current financial year, saying it first needed evidence for how well Frontier’s newest game is selling before revisiting its numbers.
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. It will also release another game, Elite Dangerous: Beyond – Chapter 2, on 28 June.
The shares trade on a very rich 51 times forecast earnings for the year to May 2019 hence there are high expectations for the Jurassic World game to be a big hit. Failure to meet expectations could be devastating for the share price.
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.
In addition to producing its own games, Frontier now says it will also consider third party publishing to accelerate its growth plan, namely controlling the promotion and distribution of other developers’ games. (JC)