Equities researchers at Jefferies have gifted Games Workshop Group PLC (LSE:GAW) with a 'buy' rating on news that the Warhammer 40k manufacturer reached an agreement with Amazon.com Inc (NASDAQ:AMZN) to develop the group’s intellectual property into film and TV productions.
Amazon has also been granted merchandising rights for the Warhammer 40k universe, which is a popular turn-based science fiction game played with intricate miniature figurines.
“This is very exciting news for Games Workshop. Licensing income has built strongly in recent years, from £2mln in 2015 to £17m in 2023,” said Andrew Wade at Jefferies.
Wade continued: “But we saw a more limited progression ahead, believing that only a major film deal would support another step-change. With today's news, that is now a very real possibility.
“Moreover, a mainstream TV or film product could be game-changing in terms of Warhammer's brand reach and awareness.”
Downside risks come in the form of lacklustre operational improvements, failure to ink additional licensing deals, and, as an exporter, Sterling appreciation.
However, with shares up 17% in the past five days and more upside to come, “pass the popcorn”, says Wade.