On Monday, Team17 Group Plc shares (TM17:LN) (OTC: TSVNF), a video game company, received an Outperform rating from RBC Capital, with a price target set at GBP 3.60. The initiation of coverage comes as the company has undergone significant strategic changes under the guidance of new CEO Steve Bell.
Following a challenging fiscal year 2023, CEO Steve Bell has led a re-focusing effort at Team17. The company has adjusted its cost structure and shifted its emphasis towards higher-margin, first-party intellectual properties. This strategic pivot is expected to result in a two percentage point margin recovery from fiscal year 2024 and enhance cash flow.
RBC Capital's assessment is based on a conservative adjusted normalized EBITDA compound annual growth rate (CAGR) of approximately 7.0% from FY23 to FY26. The current valuation of 8.8 times FY25 estimated EV/EBITDA is seen as not fully reflecting Team17's recent re-positioning efforts.
The firm anticipates that the successful implementation of the FY24 estimates, along with evidence of the company's revamped strategy, will lead to a market re-rating. This re-rating is projected to be around 11.0 times EV/EBITDA, aligning with RBC Capital's price target of 360 pence and supporting the Outperform rating.
Team17's new direction under CEO Bell aims to leverage the company's refreshed strategy to realize its full potential in the market and improve shareholder value. The Outperform rating by RBC Capital suggests confidence in Team17's ability to navigate the changes and deliver on its financial targets.
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