The gaming sector is expected to see gradual improvement in 2025 after being affected by oversupply following the pandemic. This is according to Simon Jönsson, analyst at ABG Sundal Collier, during a studio call with ABG Private Banking.
According to Jönsson, the pandemic caused the sector to overheat and, when it subsided and demand cooled, it led to an increase in supply.
“This has led to a clear imbalance between supply and demand,” says Jönsson.
This also had the effect of increasing competition between companies, as players had more games at their disposal. The decline of companies has had repercussions on their valuation.
“This is partly right, as many acquisitions have performed poorly and resulted in low returns. But the question is whether the devaluation has been too severe. Comparable companies globally have recently been revalued , especially some large players who have performed well Nordic companies are now trading at a lower price, which is partly reasonable given their greater exposure to mobile games,” explains Simon Jönsson.
He also highlights two favorite cases in the industry: MTG and Embracer. The first due to a low valuation and organic growth that is expected to improve significantly in the future: “MTG’s significantly higher profit growth justifies a higher multiple,” explains Jönsson.
The valuation is also the reason why Embracer is favored. After Asmodee’s separate listing, the company is expected to trade at 5-6 times earnings, representing an “unjustified discount” compared to other Nordic companies.
“Embracer has better growth opportunities than, for example, mobile gaming companies, and we see great potential for improved cash flow in 2025, especially in relation to the launch of the big game Kingdom Come Deliverance II” , says Simon Jönsson.
