Berenberg ups TP on Frontier Developments following Warhammer deal

Analysts at Berenberg upped their target price on video games maker Frontier Developments from 1,800.0p to 2,000.0p on Monday, stating the group had really put the "(War)hammer down".

Berenberg said it could not be more confident in Frontier's growth outlook following the group's 2020 full-year trading update and increased its full-year underlying earnings estimates for the group by 4-10% over the next three years.

The German bank, which reiterated its 'buy' rating on the group, said the upgrade was made to account for stronger player engagement in Frontier's existing franchises, accelerating third-party publishing game pipeline and the expected release of a Warhammer real-time strategy game in 2023.

The analysts also highlighted Frontier's recent securing of the exclusive IP rights for Warhammer from Games Workshop as having "significant potential".

"We now expect sales to increase c2.4x in FY 2020-23 (c33% CAGR) under, what we believe, are conservative assumptions," said Berenberg.

The analysts added that Frontier itself expects revenues to be towards the top of its previously stated range of £65-72m, while underlying revenues were pegged to be around £11m-13m - roughly 8% higher than midpoint estimates.