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Investing.com -- Embracer Group (ST:EMBRACb) shares have fallen more than 12% on Thursday following its pre-released third-quarter fiscal 2025 numbers.
While the company reported strong results, Barclays (LON:BARC) raised concerns over the AAA game release schedule and revenue stability.
The brokerage noted that while Embracer has a strong pipeline of titles, only two AAA games are expected to launch in the fiscal year 2026, both toward the end of the year.
Barclays analysts pointed out that Embracer’s third-quarter fiscal 2025 results were largely supported by one-off revenue streams, including external development partnerships and subscription platform deals.
Specifically, the company benefited from agreements related to Dead Island 2 and the Goat Simulator franchise.
These temporary boosts contributed to a strong quarter, but Barclays warns that such revenues may not be sustainable going forward.
Embracer highlighted the strong performance of Kingdom (TADAWUL:4280) Come: Deliverance 2, which sold over one million copies within 24 hours and is approaching two million units.
The company expects the title to continue generating revenue, but Barclays analysts remain cautious about broader revenue trends, particularly in the mobile and entertainment services segments.
The brokerage expects low adjusted EBIT contributions from these areas in the fourth quarter of fiscal 2025.
Embracer has outlined a roadmap of 10 AAA titles planned for release between FY26 and FY28.
However, Barclays noted that delays have historically been an issue for the company, and the concentration of FY26’s AAA launches toward the end of the year raises risks of further postponements into FY27. This uncertainty has contributed to investor concerns and the subsequent stock decline.
Despite these challenges, Barclays maintains an "equal weight" rating on Embracer Group, with a price target of SEK 180.
The brokerage notes the potential upside if the company can successfully execute its release schedule and sustain revenue from key titles.
However, the analysts emphasize the need for Embracer to demonstrate consistency in delivering games on time and securing long-term revenue streams beyond one-off partnership deals.