Strong Demand for FDEV’s Creative Video Games; Stock Price Moves up ~ 13%

The year 2020 is expected to be a year for video game developers. As people are staying at home to abide by the social distancing norms, distribution of video games has soared. The UK video gaming industry is the largest in Europe and an integral part of the global video gaming industry. Also, the video gaming industry had directly and indirectly employed about 37,536 workforces.

On May 20^th, 2020, United Kingdom-based Frontier Developments Plc reported its trading update for the financial year ending May 31^st, 2020.

About FDEV: Alternative Investment Market-listed Frontier Developments Plc (FDEV) is a major publisher and developer of videogames. The market capitalisation of the company stood at £643 million as, on May 20^th, 2020, with 38.91 million shares being in issue.

Trading Update for FY20

In the full-year trading update statement, the company reported that it had witnessed strong demand for its immersive and creative videogames due to COVID-19 led lockdown announced across the world. Further, it stated that demand continued to be high in May as well, which provides it with a strong ending to the current financial year.

The management of the company is now expecting FY20 operating profit of the group to be significantly higher from the earlier reported guidance range of £11-13 million, driven by strong revenue being above the top of the earlier estimates of £65-73 million.

The company has experienced strong demand across the gaming portfolio, and all their four games have strongly contributed towards the revenue of FY20. During the year under consideration, both base game and paid-downloadable games have witnessed strong demand. Also, the Planet Zoo, which had been recently launched in November 2019, and which is FDEV's biggest PC launch to data, has received strong traction in the video gaming market. Further, in the start of May this year aggregate base game unit deals of Planet Zoo had exceeded the 1 million mark. The achievement was made in less than six months after announcement and many months earlier as compared to any of Frontier's previous game releases on PC. Not only this, during April, Elite Dangerous topped the 3.5 million base game unit ceiling, and just month ago, Jurassic World Evolution exceeded 3 million base game units retailed.

David Braben, Frontier's Chief Executive, stated that "the Covid-19 induced lockdown has evoked many challenges for people, and it has extended longer than we had earlier expected, but its heartening that a lot of people are now becoming a part of video gaming industry during these challenging times across all FDEV's gaming portfolio."

Recently on May 01, 2020, the group had updated that it has secured IP rights licenced from Games Workshop to develop and publish a real-time strategy game worldwide on PC, console and streaming platforms for release in FY23 and the group’s development roadmap is now stronger than ever, with two major releases from internal development teams are now confirmed for each of FY22 and FY23. Also, the group will benefit from the multi-platform release of an undisclosed international IP and the release of the first Formula 1 multi-platform management game together with the 2022 F1 season.

FDEV Shares Soared above 13% on May 20 post it Reported A Stonking Trading Update

Post the company reported a strong full-year trading update, its shares skyrocketed on the LSE and ended the trading session higher by 222.0 points or 13.42% at GBX 1,876.0. It was highest one day surge after May 01, 2020. Since, the PM Johnson announced a nationwide lockdown on March 23, 2020, shares of FDEV have bagged gains of approximately 56% and have significantly outperformed its benchmark index FTSE AIM 100 Index and FTSE AIM All-Share Index.

Moreover, on a Y-o-Y basis, FDEV shares were featuring a stupendous return of 85% and have relatively outperformed its benchmark index by 123% in the same time and outperformed its peers by 41%, respectively. On a YTD basis, its shares have bagged approximately 53% gains and have relatively outperformed the benchmark by 91%, which is significantly higher.

Further, FDEV shares have registered a new 52W high of GBX 1,920 as on May 20, 2020, amid times when a majority of stocks and broader indices are tilted towards their year’s lowest level. And, at the last traded price of GBX 1,876 as on May 20, 2020, its shares traded approximately 126.30% above its 52W low price level of GBX 829.0 and 2.3% below its year’s peak of GBX 1,920, reflecting a strong bullish trend in the stock amid broader bearish market sentiment.

Also, the primary trend in the FDEV shares is quite bullish, as its shares traded well above its short-term and long-term support level of 5-day, 10-day, 20-day, 30-day, 50-day, 100-day and 200-day Simple Moving Averages (SMAs), a strong positive price trend in the stock. The Price/200-day SMA ratio of the stock stood at 1.54x, which implies that FDEV shares have traded approximately 54% above its long-term crucial support level of 200-day SMAs, which is a bullish indicator, as an underlying's price above its long-term moving average is typically considered to be a favourable long-term trend in an underlying.

The Moving Average Convergence Divergence (MACD) is also rising, with the difference between 12-day EMA and 26-day EMS is positive, another positive trend in an underlying.

Conclusion

The video gaming industry as on the whole is witnessing demand influx for their products, sales across the global gaming markets have witnessed higher double-digit growth rate according to the latest media reports. Moreover, new entrants in the existing portfolio of video games have also received traction from the gaming community, which has resulted in the gaming sector thriving despite the widespread economic turmoil.

Furthermore, video games offer an engaging distraction for people who are staying at home and practising social distancing measure. The latest reports from various research houses showed that the players playing time and sales since lockdown was rolled out has significantly increased and the pace is expected to remain intact for an extended period. FDEV is also set to benefit, given the strong trend in the gaming industry.