Canaccord slashes price target on Quixant following challenging year for gaming division

Analysts at Canaccord Genuity cut their target price on technology firm Quixant from 400p down to 250p on Friday, citing a challenging year in the group's gaming division.

Quixant warned on its second-half outlook following a "significant softening" of demand from major gaming customers, including key account Ainsworth, which accounts for 17% of the group's revenue.

But Canaccord, which stood by its 'buy' rating on the firm, said Quixant remains highly cash generative, has a strong balance sheet, its customer base continues to diversify and highlighted that new business wins were supportive of a return to long-term growth.

While the Canadian broker noted that visibility was a concern, with some customers pulling back on order volumes to take a step back and develop new content, the company has still managed to maintain a 100% retention rate and continued to grow its client base.

Canaccord said the greater concern was that Quixant did not have enough visibility on orders to see a "healthy" addressable market of 500,000 gaming machines per year coming, but noted that immediate steps were being taken to rectify that.

The analysts expected new business wins to drive a return to growth from 2020 onwards and said they were encouraged by the positive momentum in developing medium-to-long-term fairways of growth, all of which held significant potential to both diversify revenue concentration and improve the quality of earnings.

"In light of the H2 warning, we have lowered our estimates to the bottom end of guidance driving EPS downgrades of 39% 2019E, 26% 2020E and 16% 2021E," said Canaccord.