Reviews

Published: Apr 07, 2023
Updated: Apr 07, 2023

Nazara Technologies' Share Review: What Brokerage houses and experts expect as share price is down 70% from All time High

ICICI Securities' Buy Call on Nazara Technologies with 44% Upside Potential

Shares of Nazara Technologies have received a buy call from ICICI Securities, with a target price of Rs 700, indicating a 44% upside potential from current levels. Despite this optimistic outlook, the gaming tech firm's stock has declined by 70% from its all-time high of Rs 1,601. As of March 20, 2023, the stock hit an all-time low of Rs 481.95.

Reasons for Buy Call

ICICI Securities has initiated coverage on Nazara Technologies with a buy rating due to the strong visibility of revenue growth in eSports and gradual profitability improvement in gamified early learning (GEL). The brokerage firm estimates a 37% YoY revenue growth in FY24E, with 45% YoY growth in eSports and 25% YoY growth in GEL. The firm also estimates an EBITDA growth of 86% YoY in FY24E, with EBITDA margin improvement of 250 bps YoY.

Valuation

Nazara Technologies shares are currently trading at 45 times one-year forward P/E, while ICICI Securities' target multiple is 41x FY25E EPS, 1.5SD below the 2-year average historical P/E. According to the brokerage, this upside: downside skew of 3.7:1 makes it a compelling buy.

Technical Analysis

The relative strength index (RSI) of Nazara Technologies stock stands at 41.3, signalling that it is 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. It is trading higher than the 5-day moving averages but lower than 20-day, 50-day, 100-day, and 200-day moving averages.

Company has shown strong growth in eSports sector

Despite a decline of 12.77% this year and 43% in the last one year, ICICI Securities has shown optimism in Nazara Technologies' growth potential. The firm's strong revenue growth in eSports and profitability improvement in GEL, along with its significant cash reserves, make it an attractive buy in the brokerage's view. However, potential investors must also consider the high volatility of the stock before investing.