Over the past few years, British video game developer Frontier Developments (LSE: FDEV) has established itself as one of the world leaders in the strategy video game category. Here, I’m going to share why I intend to buy this UK stock for my portfolio.
Well known for its Rollercoaster Tycoon games in the early 2000s, Frontier has successfully transferred that experience into a range of games that follow a similar strategic principle while appealing to wider audiences.
Adrenaline rush
Part of that wider appeal came with Jurassic World Evolution in 2018 and its sequel in 2021. In its latest earnings report in September, Frontier reported annual revenue growth of 26% to £114m for the last year. The company credited its success to the release of Jurassic World Evolution 2. The company’s latest release is F1 Manager 2022. This is the first in a new franchise of Formula 1 games where players can take on the role of team principal instead of driver.
Released in August, it’s too early to tell how much of an impact the new game has had on Frontier’s revenue. However, F1 Manager 2022 beat the all-time player peak of Jurassic World Evolution 2 by around 20% on Steam, which bodes well for the new franchise. As a yearly title,the F1 Manager series will grow and improve quicker than some of Frontier’s other franchises that have longer breaks between entries.
Despite the recent success of its games and a 26% increase in revenue, Frontier Developments stock is trading at close to its lowest price since March 2020. At £13.98 per share, the stock is currently around 58% down on its January 2021 peak price of £33.
Licence to thrill
Over the last two years, the Frontier share price has been on a rollercoaster of investor whim. The price crashed in November 2021 after the company warned investors that Jurassic World Evolution 2 sales would be lower than expected. We now know that sales were better than predicted. Yet the price has not gone back up to reflect that. As such, I believe that Frontier Developments stock is currently a bargain.
Not only does the video game developer have successful franchises like Jurassic World Evolution and Elite Dangerous under its belt, but it has now added F1 Manager at a time when interest in Formula 1 is skyrocketing across the globe.
However, even with a popular licence like Formula 1, it’s difficult for any video game developer to balance a yearly series. The studio needs to ensure that players are happy with each release while providing enough new content in the next game to bring them back.
With F1 Manager 22, I’m confident Frontier has the basis from which it can build this series into a successful yearly franchise. Therefore, I’ll be adding Frontier Developments stock to my portfolio in the coming weeks.
