Codemasters Group Holdings PLC (LON:CDM) has been downgraded to ‘add’ from ‘buy’ by analysts at Peel Hunt following a rally in the share price, saying a lot of the company’s strong performance is “baked into” in the stock.
In a note on Wednesday, which saw the broker also raise its target price for the game developer to 420p from 375p, Peel Hunt’s analysts said the company’s latest edition of its F1 racing game had been “set up for success” due to an expanded audience of gamers during the pandemic lockdown period and a shift to Grand Prix events using the game with professional F1 drivers.
READ: Codemasters tracks higher as it releases Project CARS 3
“These events garnered strong viewership, providing great exposure to the game, which we believe resulted in increased sales. This expanded audience could be largely sustainable, boosting the franchise for years to come”, Peel Hunt said.
However, the broker added that some of the company’s other releases, notably its Fast & Furious game had seen “early weakness” with a disappointing public reception, raising questions about the profitability of the franchise into the future.
The company’s other recent release, Project Cars 3, has also met a mixed reception, Peel Hunt said, adding that the game’s shift towards a more casual-friendly format “may jeopardise the franchise’s fanbase”.
Despite these shortcomings, the broker still upped its 2021 earnings forecasts for the company by 23% alongside the target price hike, however, they said “a lot of this strong performance is baked into the price” and “given the current forecasts for the outer years” they had decided to reduce the rating on the stock.
Codemasters shares were 0.3% higher at 385p in mid-morning trading.