Frontier Developments shares fall as guidance disappoints By Investing.com

By Samuel Indyk

Investing.com – Video game developer Frontier Developments (LON:FDEV) saw its shares fall over 6% on Friday after the company announced a trading update pre-market.

The company, which launched Elite Dangerous: Odyssey last month, said trading in the final months of the financial year helped deliver provisional revenue of £91mln in FY21, which is a company record.

However, the launch of Elite Dangerous: Odyssey echoed that of CD PROJEKT’s Cyberpunk failure and the gaming community has not reacted well to the launch of the game.

“CD PROJEKT (WA:CDR) paid the price for releasing a game that wasn’t up to scratch, leading to a consumer backlash, and the market value of the company has since more than halved,” said AJ Bell investment director Russ Mould.

“This disaster should have been a wake-up call for the gaming industry not to release titles until they are fully tested and ready to enjoy. However, it seems as if Frontier Developments got the message too late.”

At launch, Elite Dangerous: Odyssey suffered connectivity problems, primarily due to a fault that took 36 hours to track and rectify, while some users have also reported other performance issues.

Sentiment surrounding the game has been negative and Frontier will be hoping that they can turn users’ attitudes towards the game around. However, Mould thinks it may be too little too late.

“Frontier has already pushed through two rounds of updates, but significant reputational damage might have already been done,” Mould added.

Outlook

The company projects revenue of £130mln-£150mln for FY22, below the consensus £146mln amid delays to a new Formula 1 management simulator which is expected to be released in FY23.

“As we start our next financial year our target is to grow sales by over 50% above the record revenue just achieved,” Frontier Developments CEO David Braben said.

At 10:02BST, shares in Frontier Developments were trading lower by 6.5% at 2,459.63 pence per share.