Eight Capital analyst Adhir Kadve believes East Side Games Group (East Side Games Stock Quote, Chart, News TSX:EAGR) is pushing all the right buttons, maintaining a “Buy” rating and target price of $7.50/share for an implied return of 121.2 per cent in an update to clients on Friday.
Headquartered in Vancouver, East Side Games, formerly known as LEAF Mobile, develops and publishes free to play mobile games, with a number of titles leveraging celebrity-IP like Archer: Danger Phone, Bud Farm Idle Tycoon, Cheech & Chong Bud Farm, The Goldbergs: Back to the 80s, It’s Always Sunny: The Gang Goes Mobile, Trailer Park Boys Grea$y Money, RuPaul’s Drag Race Superstar and the soon to be released The Office: Somehow We Manage.
RuPaul’s Drag Race Superstar and The Office: Somehow We Manage feature on East Side’s Super Marquee line, and the company announced on Thursday a third title for that line based on the long-running BBC series Doctor Who, part of a multi-year agreement East Side signed with BBC Studios.
“These new high-potential IP-based game launches are a key catalyst to the ESGG story and are expected to help the company make a significantly greater impact (when compared to older hit titles like Trailer Park Boys & Bud Farm: Idle Tycoon) and to help drive strong revenue growth as these marquee titles are released and ramped up,” Kadve said.
Doctor Who has been on the air for nearly 60 years and is a multi-time winner of the BAFTA Award for Best Drama Series. Broadcast in nearly 50 countries, Doctor Who has developed a strong following around the world. Across social media, the show has 4.6 million followers on Facebook, 1.6 million YouTube subscribers, 1.6 million Twitter followers, and 1.2 million Instagram followers.
“Doctor Who has been capturing the imaginations of people for almost 60 years and we couldn’t be more thrilled and honored to have the opportunity to bring this legendary franchise to mobile,” said Darcy Taylor, Chief Executive Officer of East Side Gaming Group in the company’s January 20 press release. “This agreement with BBC Studios allows us to bring a truly iconic, globally recognized franchise to an enduring fan base of new and diehard fans and further strengthens our ‘Super Marquee’ game publishing portfolio.”
In assessing the significance of the announcement, Kadve pointed to the company’s ability to secure and develop IP-based titles as a major competitive differentiator as it now has created significant barriers to entry through its various IP licensing agreements, as well as a significantly lower cost of user acquisition by leveraging celebrity and/or TV show fan bases and social reach.
“With increasing user acquisition spending, strong initial results from RuPaul’s Drag Race and a strong pipeline of titles like The Office and Doctor Who set for release throughout the year, we continue to see a strong setup for ESGG in F22,” Kadve said.
Since it began trading on the Toronto Stock Exchange on February 10, East Side’s stock price has dropped by 29.4 per cent after an early high of $4.95/share on February 12. However, since it hit a low of $2.30/share on November 11, the stock has bounced back with gains of 450.4 per cent in that time.
In addition, Kadve has East Side Games Group trading at 1.7x its 2022 fiscal year revenue projection, which he calls a steep discount to its independent game publishing peers trading at 6x.