Gaming giant Aristocrat Leisure is under pressure to explain the performance of its mobile games business as downloads of its most popular products have slowed significantly, weighing on its share price decline.
Although best known as one of the biggest manufacturers of poker machines in the world, the $22.5 billion ASX-listed group now generates just over half of its revenue from its growing range of online games.
Digital activity is expected to be a major focus for investors when Aristocrat releases its half-year results on May 19, with analysts saying fears that two of its most successful mobile games will wane in popularity was one of the factors driving the news. cause of the fall in the share price.
Shares of Aristocrat have fallen 29% in the past six months, closing at $33.66, after hitting an all-time high of $49.65 in November, largely on optimism around the digital sector when many people were looking for entertainment during the COVID-19 pandemic.
But digital game activity was down 9% in March from a year earlier, Barrenjoey analysts said based on Sensor Tower’s App Store download data. Fantasy roleplaying game downloads Raid: Legends of Shadow, one of Aristocrat’s most successful, was down 27% and a puzzle game AlwaysMerge fell 43%.
“While this is a short period, we cannot ignore the slowdown in the growth trajectory,” Barrenjoey analyst Matt Ryan said in a research note.
Morningstar equity analyst Angus Hewitt said one of the big questions investors would have for Aristocrat on its half-year results would be “how fast the digital games industry is growing or how much it is slowing down.”
“There haven’t been many market updates to justify what’s going on [to the share price]but we are potentially seeing slower growth in the digital games industry,” Hewitt said in an interview.
“My feeling is that…the sustained optimism in this endeavor had taken Aristocrat’s valuation into a pretty expensive realm and it just comes back to reality.”