PAYDAY 3 Reliance Will Challenge Stability But Spark Renewal

Key Takeaways

• Heavy reliance on a single franchise and execution risks threaten Starbreeze's revenue stability and long-term player retention.
  
• Rising costs, regulatory scrutiny, and limited external funding may hinder profit growth and the ability to capitalize on new opportunities.
  
• Heavy dependence on PAYDAY and uneven game launches elevate revenue risk, while rising costs and intense competition threaten profitability and long-term market position.

Catalysts

Develops, publishes, and distributes PC and console games in Europe and North America.

• While Starbreeze benefits from international digital distribution and the growing gaming population with positive community sentiment rebuilding around PAYDAY 3, the company's heavy dependence on a single franchise exposes it to significant revenue concentration risk and potential franchise fatigue, undermining earnings stability if future releases or content updates underperform.
  
• Despite ongoing monetization improvements via live-service models and plans for recurring revenue streams with GaaS, the company faces execution risk in delivering consistent, on-time content and technical reliability, which may erode player trust and lead to higher churn, limiting long-term revenue growth.
  
• Although self-publishing PAYDAY 3 should result in higher net margins by removing distributor revenue splits, rising industry competition and the continuing escalation of development costs threaten to compress margins and make it harder for Starbreeze to achieve sustainable profit at scale.
  
• While the expansion into work-for-hire projects and a robust upcoming title (Baxter), which received positive feedback, increase revenue diversification, persistent regulatory scrutiny on monetization methods and changing demographic trends could shrink the monetizable player base and negatively impact future sales and earnings growth.
  
• Although improvements in organizational efficiency and a strong cash balance support continued investment in new projects, higher cost of capital and a history of financial instability may restrict access to additional external funding, thereby limiting Starbreeze's capacity to fully capitalize on favorable industry trends or weather inevitable cyclical downturns.

Starbreeze Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Starbreeze compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Starbreeze's revenue will grow by 9.3% annually over the next 3 years.
• The bearish analysts are not forecasting that Starbreeze will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Starbreeze's profit margin will increase from -132.3% to the average SE Entertainment industry of 15.8% in 3 years.
• If Starbreeze's profit margin were to converge on the industry average, you could expect earnings to reach SEK 43.4 million (and earnings per share of SEK 0.02) by about August 2028, up from SEK -278.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 12.5x on those 2028 earnings, up from -1.1x today. This future PE is lower than the current PE for the SE Entertainment industry at 25.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.4%, as per the Simply Wall St company report.

Starbreeze Future Earnings Per Share Growth

Risks

• Starbreeze's increasing reliance on the PAYDAY franchise, with third-party publishing efforts being discontinued and most resources focused on PAYDAY and Baxter, leaves the company exposed to franchise fatigue and shifts in consumer preferences, which could lead to revenue concentration risk and volatile future earnings.
  
• Despite recent improvements, PAYDAY 3 is recovering from a mixed launch and still requires significant ongoing rework and content updates to improve ratings and player retention, so any missteps in execution or delays in delivering new content could lead to higher churn and put downward pressure on both net revenues and future profitability.
  
• The company continues to report losses after tax and is heavily investing in game development, with SEK 96 million invested in H1 2025 and ongoing capitalized development expenses, so there is a risk that these investments will not translate into sufficient revenue growth to offset amortization and operating costs, which could extend periods of negative net margins.
  
• While Starbreeze has achieved work-for-hire revenue growth, it is partially dependent on maintaining successful partnerships and securing new contracts in a highly competitive landscape, and any slowdown or loss of major contracts with companies like KRAFTON could diminish revenue streams and reduce overall earnings stability.
  
• The broader gaming industry is experiencing rising development costs, intense competition from both larger studios and well-funded indie developers, and increasing scrutiny on monetization models, all of which may compress Starbreeze's operating margins and limit its ability to grow revenues or defend market share over the long term.

Valuation

• The assumed bearish price target for Starbreeze is SEK0.22, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Starbreeze's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK0.45, and the most bearish reporting a price target of just SEK0.22.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be SEK274.8 million, earnings will come to SEK43.4 million, and it would be trading on a PE ratio of 12.5x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of SEK0.18, the bearish analyst price target of SEK0.22 is 17.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.