Keywords Studios PLC (AIM:KWS, OTC:KYYWF)’s active M&A strategy has put the video game services company in a good position to offset organic growth pressures prevalent in the video game landscape.
The acquisition of the Multiplayer Group is a significant factor in this outlook, contributing a 5.5% increase to 2024 revenue forecasts and a 7% rise in adjusted operating profit.
This savvy strategic move also provides a 3.4% uplift in adjusted earnings per share.
“Concerns over AI hang over Keywords and we think that delivery over time is the only way to regain some of the derating lost to this factor,” said Barclays. “But we do think that Keywords is well positioned in an industry that can grow well over time – and that AI is only a possible mid-term concern for some corners of the group.”
Barclays also acknowledged sales challenges in Keywords’ core video game market, being “a market where everyone is looking to cut corners to support profits”, but the bank still maintains a positive outlook on Keywords, emphasising the firm's strong positioning in an industry with potential for long-term growth.
Additionally, the end of the SAG-AFTRA actors' strike is anticipated to aid Keywords' recovery in 2024, contributing approximately one percentage point to the group's organic growth for the year.
This factor, combined with the company's strategic initiatives, positions Keywords favourably for future growth, despite the current industry headwinds.
Barclays retains an overweight rating on Keywords Studios with a revised price target of 1,915p against a 1,528p publication price.