Axion Ventures has an 86 per cent upside, says PI Financial

The share price for gaming investment company Axion Ventures (Axion Ventures Stock Quote, Chart TSXV:AXV) has been dropping in recent months, which makes it a cheap pickup, says analyst David Kwan of PI Financial, who in a Wednesday update is staying bullish on the company.

Vancouver-based Axion reported its fourth quarter and year ended December 31, 2018, on Wednesday, coming in with total revenue for the year of $8.9 million, up from $6.6 million in 2017, and a loss from operations of $7.8 million compared to a loss of $8.8 million a year prior.

“With our successful beta launch of Rising Fire with Tencent, this year represents an inflection point for our Company as three further titles from our 2,000+ man year portfolio are launching on various platforms and commencing their monetization life cycle’s which should last six to ten years,” said CEO Todd Bonner in a press release.

For the quarter, Axion reported a top line of $4.6 million, which was slightly up from Kwan’s $4.5-million estimate and up from last year’s $2.1 million. On Adjusted EBITDA, AXV generated $1.7 million, which was also better than Kwan’s negative $1.8 million forecast. The analyst chalked up the improvement to higher than expected gross margins and lower than expected operating expenses. Kwan calls the impact of the quarter a positive and says that he’s watching for the launch of mobile game Invictus: Lost Soul sometime during the next two weeks, a game that Axion management is hoping will do well.

The analyst is maintaining his “Buy” recommendation and $1.75 target price, which represented a projected return of 86.1 per cent at the time of publication.

“The recent share price weakness is a good buying opportunity in our view, especially with some key upcoming catalysts, most notably multiple licensing deals for RF (and possibly Invictus) as well as updates on the ramp of Rising Fire, particularly after the major content payload set for release next month,” says Kwan.

The analyst is expecting fiscal 2019 revenue and Adjusted EBITDA from Axion of $30.2 million and $8.3 million, respectively.