Tabletop games giant Games Workshop (LSE:GAW) has seen its share price rise an incredible 1,330% during the past 10 years. It’s helped pioneer the growth of the fantasy genre since it opened its first store in the late 1970s. It is now an industry leader with a market-cap of £3.2bn.
The FTSE 250 company traded at £31 per share just five years ago. Now its shares change hands for more than three times that value, at just shy of £99.
Games Workshop shares hit a record high of around £120 back in September 2021. And I think the business is in great shape to top that in 2024. Here’s why.
Mega media deal
Image source: Games Workshop Limited
The buzz around the business currently centres on its plans to develop film and television content with Amazon.
In late 2022 it first announced discussions to bring its sprawling Warhammer universes to life with the US retail and streaming giant. And last month it said it had granted exclusive rights “for the prospective development by Amazon of Games Workshop’s Warhammer 40,000 universe into films and television series, together with associated merchandising rights“.
The firm has also given the option “to license equivalent rights in the Warhammer Fantasy universe” following the release of any Warhammer 40k production.
Up to now Games Workshop has predominantly licenced its IP for a string of highly-successful video games. The deal with Amazon could therefore take royalty revenues to the next level. Its world of Space Marines and Stormcast Eternals have huge cinematic potential and is ripe for showcasing on the big (and small) screen.
What’s more, the company would also likely enjoy significant opportunities to cross-sell its games, models, books and other fantasy paraphernalia through its stores and local websites.
Sales strength
Fresh news on a blockbuster media deal could drive Games Workshop’s share price higher again. But this isn’t the only reason to be optimistic for the company in the new year.
Retailers like this aren’t immune to the broader pressure on consumer spending power. In fact the company’s last trading update in December signalled a slight slowdown in core revenues more recently.
But for the large part trading at the company remains pretty strong, which is testament to the quality of its products and the strength of fan demand. Sales growth of at least 11% was tipped for its first fiscal half (to 26 November), while pre-tax profits were expected to rise around 12%.
Its Warhammer products continue to sell like hotcakes, with its Leviathan box set — the 10th version of its Warhammer 40,000 system — selling out immediately on its June release. Signs of continued strong demand in 2024 could see interest in its shares light up again.
A top stock to buy
Today, Games Workshop shares trade on a forward price-to-earnings (P/E) ratio of around 22 times. I consider this fair value given its terrific growth potential around the globe.
I already own the company in my portfolio. And I plan to buy more of its shares in the new year.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Amazon and Games Workshop Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
