Following Devolver Digital Inc (AIM:DEVO) issuing a profit warning this week, broker Berenberg said "the business is not broken" but risks remain.
After the profit warning on Monday, where Devolver downgraded full-year sales and EBITDA guidance due to poor performance of three of its most heavily invested titles, the analysts said it is "hard to be positive given we see further downside risk to consensus estimates".
"However, the business is not broken, and medium- to long-term opportunity remains positive and therefore there will come a time to review our investment case."
Shares in the video games publisher, which were floated at 157p in November and rose above 218p in January, have fallen 58% this week and "are short-term oversold, trading on a discount to the sector", Berenberg analysts said.
Berenberg's price target was slashed to 80p from 1800p.
One risk is that sales and profit remain around 60% and 75% respectively weighted to the performance in the second half of the year, the analysts said.
"Many of the challenges in H1 will remain true in H2: 1) game release congestion will remain in H2 given the game release pipeline announced by peers; 2) cost inflation is unlikely to abate; and 3) potential softening of consumer spending.
"Further, as history has shown, development challenges are never usually a 'one-and-done' type of profit warning, with these issues often taking time to fix."
With a 'hold' recommendation, the analysts explained that as Devolver has de-rated considerably and is at a discount to the sector, "we believe it is more appropriate to be thinking 'when is the time to buy' as Devolver remains one of the best indie publishers in the industry".