Keywords Studios set for double-digit revenue growth for years to come, Barclays says

Keywords Studios PLC (LON:KWS) looks set for double-digit percentage revenue growth for many years to come, according to Barclays. In a research note issued following yesterday’s results announcement from the computer games development services provider, Barclays said there was nothing too surprising about the results, with company guidance in line with the consensus forecasts in the analyst community. “But 1) we think it is a positive that management has provided specific guidance (not the case before); 2) there is a tone of conservatism around their comments given good YTD [year-to-date] momentum (appropriate in current environment but leaving room for positive forecast momentum); and 3) management remains positive on further outsourcing among video game groups, enhanced by the pandemic,” Barclays said. READ Keywords Studios profits jump a third as gaming market booms during pandemic The Barclays team said that as per usual there is scope to boost organic revenue growth with bolt-on acquisitions in “a fragmented landscape”. “So while the shares do not look cheap on 34x 2022E P/E [projected price/earnings ratio], we estimate this could come down to 24-26x if they were to spend a further EUR200mln on bolt-ons at 6-8x [annual EBITDA}. That might not be easy to execute but they have the room and the desire,” Barclays said. The broker advised its clients to remain overweight in the stock, which trades at 2,490p versus Barclays’ price target of 2,900p.