Keywords Studios PLC (AIM:KWS, OTC:KYYWF), a leading service provider to the global video game industry, has continued its trajectory of steady growth, according to recent reports by Stifel and Panmure Gordon.
Despite concerns over a weak pipeline for AAA titles and potential disruptions from artificial intelligence (AI) technologies, the company has reassured investors with its latest financial results and strategic initiatives.
Stifel says AI will help, not hinder Keywords
Stifel has affirmed its ‘buy' rating on Keywords Studios, citing the company's full-year results which aligned with the January 25 trading update.
The firm highlighted a 13% year-over-year growth in revenue to €780 million, including a four percentage point headwind from foreign exchange fluctuations. Notably, the underlying organic growth, adjusted for FX and impacts from US strikes, was reported at 9%.
On the artificial intelligence (AI) front, Stifel analysts said: “It is seeing good traction across its AI initiatives and the messaging around this is that it expects AI to be a helpful tool to assist in production – not replace it.”
Keywords’ AI tools are “seeing good traction”, said Stifel, noting progress in the Mighty testing solution, Helpshift AI-based customer support and KantanAI.
Create division driving growth, says Panmure
Panmure Gordon echoed a positive sentiment, maintaining a 'buy' recommendation with an unchanged target price of 2,850p.
Analysts called attention to the Create division, stating: "The Create division (predominantly game development) is still the main growth driver for the group. It saw 22% reported growth and 17% organic growth and now constitutes 43% of revenues and 59% of adjusted EBITDA.
“Overall the fastest growing and highest-margin aspects of the business are becoming more material on a proportional basis.”
“Keywords is a highly diversified play on the global video games space, and the shares remain our favourite way to participate in this structural growth opportunity,” said analysts.