Shares of UK gaming company Frontier Developments Plc tumbled after it said sales of its flagship F1 Manager 2022 title fell below expectations during the holiday season, sending a chill through the video-game sector.
(Bloomberg) — Shares of UK gaming company Frontier Developments Plc tumbled after it said sales of its flagship F1 Manager 2022 title fell below expectations during the holiday season, sending a chill through the video-game sector.
AIM-listed Frontier plunged by as much as 42% on Monday, its biggest intraday decline on record. The Cambridge, England-based firm said it no longer expects to meet consensus estimates for revenue and operating profit for its fiscal year ending in May, following the performance of F1 Manager, its Formula One car racing management simulator.
“This is even more disappointing given the expectations around the F1 Manager game, which many had expected to be a stellar addition to the portfolio,” said Mirabaud Securities analyst William Mileham. Frontier’s message of weaker holiday game sales bodes ill for other video-game giants such as Ubisoft Entertainment SA, NetEase Inc., and Electronic Arts Inc., he added.
Other major European video-game stocks also fell, with France’s Ubisoft down as much as 3.9% and Sweden’s Embracer Group AB dropping 3.1%.
With the cost-of-living crisis raging, Frontier said players have become more sensitive to prices and purchased fewer copies of F1 Manager than it had expected, even when the game launched last August was selling at a discount in December. The company is also reviewing its strategy for titles developed by third-party studios.
“We expect the reckoning to be extreme in the short-term” with earnings estimates to go down by potentially 40% in fiscal 2024, said Citigroup analyst Thomas Singlehurst, who rates Frontier as buy.
Frontier said it’s now aiming for at least £100 million ($122 million) in revenue for its current fiscal year, compared with £114 million a year earlier. The stock fell to 575 pence a share at one point on Monday, its lowest level since July 2017. That marks a 83% decline from its peak recorded in January 2021.
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