Deutsche Bank Adjusts Team17's Outlook
Deutsche Bank has recently re-evaluated its position on Team17 Group Plc (TM17:LN) (OTC: TSVNF) by changing its recommendation from "Buy" to "Hold". This adjustment includes a revised price target of GBP3.00. The reasoning behind this shift stems from concerns regarding anticipated sales downturns for new releases from Team17's Games Label, particularly in the upcoming fiscal year.
Decline in Games Label Performance Expected
The analyst at Deutsche Bank expressed worries about the potential for a significant drop in sales, with predictions indicating a potential multi-year low for Team17's Games Label. This decline poses a risk to the company's growth outlook for the next fiscal year, raising questions about the sustainability of its performance.
Revised Revenue Forecasts
In light of the downgraded expectations, the revenue forecast for the Games Label has seen a sharp adjustment. Initially forecasted to grow by 1% in fiscal year 2024 and 5% in fiscal year 2025, those numbers have now shifted to a predicted decline of 5% and 4% respectively. This stark revision reflects a more cautious stance on future performance and highlights significant headwinds the company may face.
Positive Indicators from Other Segments
Despite the concerning outlook for the Games Label, Deutsche Bank suggests that other divisions of Team17 are likely to perform better. The growth from astragon and StoryToys segments may serve as a buffer against the anticipated decline in Games Label revenue.
StoryToys Growth Potential
With StoryToys surpassing 350,000 subscribers, there is optimism for continued growth. Analysts believe that strategies focused on cross-app subscriber conversions, partnerships for new intellectual properties (IP), and efforts to expand onto new platforms will enhance revenue streams. These developments could potentially mitigate some of the setbacks expected from the Games Label.
Astragon's Promising Contribution
Looking ahead, Deutsche Bank anticipates that the upcoming release of Farming Simulator 25 will play a crucial role in bolstering astragon's performance during the latter part of the financial year. Combined with another proprietary IP title expected to launch in fiscal year 2025, these factors may help stabilize Team17's overall financial health.
Sales Forecasts Adjusted Downwards
In summary, Deutsche Bank has lowered its sales forecasts for Team17, projecting a decrease of 5% to £162.9 million for fiscal year 2025 and by 4% to £172.3 million for fiscal year 2026. These new estimates fall 3% below consensus expectations for both fiscal years. As a result of this downward trend, there is a corresponding anticipated reduction in adjusted EBITDA and adjusted EPS forecasts for those years, projected at 5-6%.
Frequently Asked Questions
What rating has Deutsche Bank given Team17 Group Plc now?
Deutsche Bank has adjusted its rating from "Buy" to "Hold" for Team17 Group Plc.
Why has Team17's sales forecast been reduced?
The sales forecast has been reduced due to concerns about a decline in new release sales from the Games Label.
What are the anticipated revenue changes for Team17?
The revised forecast indicates a 5% decrease for fiscal year 2024 and a 4% decrease for fiscal year 2025.
How is StoryToys performing for Team17?
StoryToys has exceeded 350,000 subscribers, presenting growth opportunities through new partnerships and platform expansions.
What impact does the Farming Simulator 25 have on Team17?
The upcoming Farming Simulator 25 is expected to significantly contribute to astragon's performance, particularly in the latter half of the year.
