Proactive Investors - Shore Capital has upgraded its investment recommendation on Frontier Developments PLC (LON:FDEV), the video games maker, from 'hold' to 'buy'.
This change of stance comes on the back of promising developments within the company's game portfolio, notably the successful launch of Planet Zoo's console edition (PZ CE) and the sale of publishing rights for RollerCoaster Tycoon 3 to Atari announced earlier on Tuesday.
The positive sales momentum from Planet Zoo, especially with the release of its console edition on March 26, has exceeded the launch sales of the Planet Coaster console version.
The Ultimate Edition of PZ CE, priced at approximately £100, includes a season pass for 14 future content packs over the next 12 months, indicating a strategic revenue generation model with part of the revenue deferred to financial year (FY) 25 as the content is released.
At the same time, Frontier Developments' sale of RollerCoaster Tycoon 3 publishing rights to Atari for $7 million, a mix of upfront and deferred cash, is expected to positively impact the company's FY24 adjusted EBITDA forecast, reducing the anticipated loss from £19 million to £15 million.
FD has maintained its revenue guidance of £80-95 million, with Shore Capital forecasting revenue at £83 million. The company's cash position has improved, with net cash increasing to £23.4 million as of March 31, from £19.9 million at the end of December 2023.
In late morning trading, the stock was up 16% at 163.4p.