Canaccord Genuity reiterates 'buy' rating on Sumo Group

Analysts at Canaccord Genuity reiterated their 'buy' rating on video games developer Sumo Group on Tuesday but noted that while demand had strengthened as a result of the Covid-19 pandemic, the outbreak had impacted recruitment.

Canaccord reduced 2020 sales estimates by 20% and adjusted underlying earnings estimates by 14% due to the Covid-19 impact, reflecting a lower estimated average direct full-time employee number for the year.

"Game development demand remains very strong and the scarce resource is once again skilled staff," said Canaccord.

However, assuming the lockdown period finished in June, the Canadian broker anticipates any logistical disruption, in addition to recruitment slowdown, would broadly be offset by cost base reductions.

"Obviously if the lockdown lasts longer than Q2, then this would impact FY20 more materially and have a more material knock-on effect on FY21," said Canaccord, which also reiterated its 200p target prtice on Sumo.

"Such is the strength of the games market we make minimal changes to FY21E," added the analysts.