Citi says threat to Keyword Studios from Generative AI 'likely overstated'

"For what it is worth, it strikes us that some of the concerns about the long-term risk associated with generative AI - which are oft cited as the factor behind the recent aggressive derating - are likely overstated," they said in a research note sent to clients.

They did however slash their discounted free cash flow-based target price from 3,030p to 2,100p as they fine tuned their valuation model.

The specifics behind that reduction were the higher so-called Beta induced by rising rates and higher share price volatility and an increase in the discount rate from 8.5% to 10.0%.

"That our change in PT is so significant is an apt reminder of how much of KWS's value is in the medium- and long-term growth and that even a small change in discount rate can diminish its NPV."