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Can Games Workshop shares triumph despite retail volatility?

Games Workshop share price has surged this year due to strong sales and solid dividend projections. With volatility and unpredictability reigning supreme, investors are bullish on the wargame manufacturer’s prospects.

British retail, moreover, retail in general, has been hit hard by COVID-19 restrictions. However, in among falling profits and closures, Games Workshop (LON: GAW) has marched forward almost unimpeded. Like the miniature war figurines it creates, the FTSE 250 Index company has looked strong throughout the pandemic with a growth of more than 70%.

Games Workshop shares dip but still strong

Games Workshop shares opened at 9,800p on 8 December. That’s down from the 10,550p high they achieved on 7 December. However, today’s Games Workshop share price is still 72% higher than it was on 9 December 2019 (5715p). Much of the bullish sentiment is a result of two profit forecasts. Guidance issued on 6 November stated that pre-tax profit would be approximately £80 million for the year. Fast-forward to 7 December, and the company issued a revised profit forecast of ‘not less than £90 million’.1

The positive projections have prompted analysts at Peel Hunt to issue a buy rating. The recent sales performance of Games Workshop was cited as a direct reason for assessment. However, the underlying strength of its dividend structure is also fuelling bullish long-term expectations. Commenting on the Games Workshop share price, Peel Hunt said cash generation and a dividend of 60p per share are ‘strong’. The critique also takes into account last year’s financial performance and dividend statistics. Overall, Games Workshop paid out 66% of its profit as dividends, accounting for 59% of its cash flow, in 2019.

Dividend stability helps Games Workshop share price

In testing times, particularly for the retail sector, it seems that investors are attracted to such a dividend structure. With profits set to increase this year and Games Workshop operating within its means, the outlook is positive. Peel Hunt analysts believe it’s ‘highly likely’ the company will beat their financial projections.

As such, they’ve issued a Games Workshop share price target of 12,500p. Given the rocky year British retail has had in 2020, that’s a target worth noting. Indeed, with Games Workshop shares currently trading at 9800p and the company a relative bastion of calm in otherwise choppy waters, the expectation is that more growth is likely in the coming months.

Do you have a view on where the Games Workshop share price is headed next?

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1 https://investor.games-workshop.com/

2 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

3 Deal three times or more in the previous month to qualify for our best rate.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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