Digital Entertainment Adoption And PAYDAY Expansion Will Redefine Multiplayer Gaming

Key Takeaways

• Full control of the PAYDAY franchise and expansion into new media are set to drive higher recurring, high-margin revenues and long-term brand value.
  
• New leadership and digital distribution focus position Starbreeze to scale live-service monetization and global reach beyond current market expectations.
  
• Dependence on a single franchise, costly development, profit-sharing obligations, and regulatory challenges threaten margin stability and long-term profitability amid increasing industry and execution risks.

Catalysts

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

• Analyst consensus anticipates meaningful revenue growth from Starbreeze's PAYDAY collaborations, but with the full reacquisition of PAYDAY publishing rights and now receiving 100% of net revenue (versus previous revenue splits), there is a step-change in gross profit potential and future recurring revenue from long-tail franchise expansion that is likely being underestimated.
  
• While the analyst consensus points to steady revenue from ongoing content releases and platform expansions, the appointment of a CEO with proven success in scaling digital revenues and global publishing at Electronic Arts suggests Starbreeze can accelerate multi-platform, live-service monetization and leverage digital distribution partnerships at a much larger scale than expected, significantly boosting both revenues and long-term operating margins.
  
• The company's stated intention to aggressively explore transmedia opportunities-including PAYDAY TV and movie adaptations and expanded licensing-positions Starbreeze to capture substantial new revenue streams well beyond traditional gaming, potentially creating high-margin royalty and brand-driven income that could meaningfully lift net income in the medium to long run.
  
• The mainstreaming of downloadable games and live-service content globally, paired with the PAYDAY franchise's large and growing installed base, uniquely positions Starbreeze to benefit from surging digital game engagement and content spend, providing a clear path to revenue scaling and improving cash flow reliability over time.
  
• High-speed internet access and global adoption of multiplayer gaming ecosystems are expanding Starbreeze's addressable audience for both existing and upcoming titles such as Baxter, creating the potential for network effects, higher average revenue per user, and superior recurring revenue, underpinning robust medium
• and long-term earnings growth.

Starbreeze Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Starbreeze compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Starbreeze's revenue will grow by 19.2% annually over the next 3 years.
• Even the bullish 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 -164.1% to the average SE Entertainment industry of 7.5% in 3 years.
• If Starbreeze's profit margin were to converge on the industry average, you could expect earnings to reach SEK 25.2 million (and earnings per share of SEK 0.02) by about August 2028, up from SEK -323.2 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 bullish analyst cohort, the company would need to trade at a PE ratio of 36.0x on those 2028 earnings, up from -1.0x today. This future PE is greater than the current PE for the SE Entertainment industry at 16.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.43%, as per the Simply Wall St company report.

Starbreeze Future Earnings Per Share Growth

Risks

• Starbreeze's continued heavy reliance on the PAYDAY franchise as its cornerstone exposes the company to significant brand fatigue and escalating competition in the co-op shooter genre, which could impair future player engagement and put downward pressure on both revenue and earnings if new IPs like Baxter do not achieve commercial success.
  
• The substantial ongoing investments in game development, paired with large capitalized intangible assets and the company's historically high development and marketing costs, create risk that future projects may not generate sufficient returns to offset expenses, threatening net margins and leading to volatility in overall profitability.
  
• The company's aggressive move to regain full publishing rights for PAYDAY and increased ambition around transmedia expansion introduces additional execution complexity and financial risk, while the 33 percent profit-sharing obligation for PAYDAY 3 with Digital Bros' will continue to weigh on net revenue, limiting earnings leverage from the franchise even as top-line sales potentially grow.
  
• Broader industry dynamics, including rising development costs and technology complexity for flagship titles, may outpace Starbreeze's resources, increasing the likelihood of delayed releases, cost overruns, or quality compromises, which can erode reputation and negatively impact both revenue streams and margin sustainability over the long term.
  
• Intensifying global regulatory scrutiny on digital content, data privacy, and monetization models-especially in areas such as loot boxes and microtransactions-threatens Starbreeze's ability to maximize recurring revenue from its live-service games, and escalating compliance costs may further suppress net margins and dampen long-term profitability.

Valuation

• The assumed bullish price target for Starbreeze is SEK0.45, which is the highest 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 bullish 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 SEK0.26.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be SEK333.8 million, earnings will come to SEK25.2 million, and it would be trading on a PE ratio of 36.0x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of SEK0.19, the bullish analyst price target of SEK0.45 is 57.3% 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.