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Devolver Digital (DEVO) stock tanks 48% on weak full year revenue guidance

Devolver Digital's countdown to marketing was a hoot this weekend, but the stock took a massive hit after the company slashed full year sales expectations.

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Devolver Digital stunned shareholders today when it lowered its full year sales guidance citing "a competitive release window" among other factors. Shares of the company, which is traded in England, crashed over 48% on the news.

Devolver Digital (DEVO) shares crashed 48% on the slashed full year revenue guidance coming in far below expectations.
Devolver Digital (DEVO) shares crashed 48% on the slashed full year revenue guidance coming in far below expectations.

Devolver began trading on the London Stock Exchange just last year, valuing the company near $1 billion. DEVO shares hit £185/share and a low of £167/share on that first day of trading. After today's massive selloff, shares currently sit at £70/share down 62% from the high on its first day of trading in November 2021.

"Sales from new games released in the first five months of FY22 have been slower than expected, reflecting a competitive release window and specific factors for each title which are being actively addressed for future titles," said the company on its investor relations website that blocks United States IPs from accessing it. Devolver's board did try to soften the blow to the share price today stating that the company "expects revenues and profit to be weighted towards the second half of FY22, supported by highly anticipated new title releases, strong demand from subscription platforms and continued evergreen back catalogue sales at year-end."

Devolver now expects earnings before interest, taxes, depreciation, and amortization (EBITDA) to come in between $27-32 million and revenues to come in between $130-140 million during the full year 2022. 

A lot of companies that have gone public in the last few years have seen their stocks get clobbered, so today's story isn't unique to Devolver Digital. It still highlights the tough year-over-year numbers that many video game companies face coming out of the pandemic. It is also important to remember that US consumers had stimulus checks at the beginning of 2021, which is another headwind we have seen affect many companies' earnings reports over the past few quarters.

Luminary

Asif Khan is the Luminary and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.

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