Shares of Nazara Technologies have bagged a buy call from ICICI Securities with a target price of Rs 700, a 44 per cent upside from the current levels. Interestingly, the gaming tech firm’s stock has slipped 70% from its all-time high level of Rs 1,601. The stock hit its all-time low of Rs 481.95 on March 20, 2023.
“At the current market price, Nazara Technologies shares are trading at 45 times one -year forward P/E. Our target multiple is 41x FY25E EPS (1.5SD below the 2-year average historical P/E),” said the brokerage in a report on March 21.
ICICI Securities initiated coverage on the Nazara Technologies stock with a Buy rating, considering the visibility of strong revenue growth in eSports and gradual profitability improvement in gamified early learning (GEL).
In the current trading session, Nazara Technologies shares rose to a high of Rs 514.75 against the previous close of Rs 506.65 on BSE. The stock of Nazara Technologies has slipped 12.77% this year and lost 43% in the last one year. Total 0.13 lakh shares of the firm changed hands amounting to a turnover of Rs 63.74 lakh on BSE today.
Market cap of the firm stood at Rs 3,348.31 crore in trade today.
In terms of technicals, the relative strength index (RSI) of Nazara Technologies stock stands at 41.3, signaling it’s trading neither in the oversold zone nor in the overbought zone.
The stock has a beta of 1.2, indicating high volatility in a year. Nazara Technologies stock is trading higher than the 5 day moving averages but lower than 20 day, 50 day, 100 day and 200 day moving averages.
“We estimate 37% YoY revenue growth in FY24E, led by 45%YoY in eSports and 25%YoY growth in gamified early learning (GEL). We estimate EBITDA growth of 86% YoY in FY24E led by EBITDA margin improvement of 250bps YoY as eSports IPs scale up and GEL profitability improves due subscriber additions and price increases. Nazara has Rs 660 crore in cash (additional Rs 40 mn in SVB),” the brokerage said.
“We believe this could be used to acquire scale through acquisition in real money gaming, once regulatory clarity emerges. Also, Nazara could benefit from inexpensive acquisition opportunities in the current liquidity situation. In case these triggers play out, we see a bull case valuation of Rs 800 (for Mar’24). In case growth slows or margin improvements do not play out, we see a bear case valuation of Rs 400 (for Mar’24). This implies an upside: downside skew of 3.7:1, which makes it a compelling BUY, in our view,” added the brokerage.
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