Berenberg lowers target price on TinyBuild

Analysts at Berenberg cut their target price on video games publisher TinyBuild from 325.0p to 250.0p on Tuesday but said the group's business model was continuing to show strength.

Berenberg said despite challenges faced by the industry in 2021, TinyBuild's results, published earlier in the day, showed it had managed to successfully buck the trend, with no disruption, delivering growth of 39% – the vast majority of which was organic.

In addition to this, Berenberg highlighted that by generating 11% higher sales from the intellectual property it owns/partially owns versus IP that it publishes, the company's margins had expanded and allowed it to deliver 64% underlying earnings growth in the year.

The German bank also added that with TinyBuild's back catalogue expected to deliver roughly 70% of revenues in 2022, plus a de-risked new catalogue via licence deals and predictable DLC/early access content, it said it was confident in the group achieving its 2022 forecasts.

"Notably, we think the company will continue to do accretive M&A, plus there is the possibility of a high-profile TV series launch and an opportunity for outperformance on the highly anticipated Hello Neighbor 2 title," said Berenberg.

"Overall, with the shares having halved since highs last year, despite earnings per share upgrades, we think now is the time to revisit the shares on circa 21x price-to-earnings. We retain our 'buy' rating but move our price target to 250.0p."