Games Workshop Shares (LSE: GAW) Flash Bearish Sign After Strong YTD Gains

Games Workshop (LSE: GAW), the company behind the popular Warhammer franchise, recently triggered a ‘death cross' on its daily stock chart, a technical indicator that often signals a potential shift towards bearish sentiment. Despite this cross, the company's year-to-date performance remains positive, with the share price up 13.75%.

The emergence of the ‘death cross' pattern, where the 50-day moving average dips below the 200-day moving average, has caught the attention of markets, and technical traders. This technical event is often viewed as a sign of weakening momentum and potential further declines. However, some analysts caution that the ‘death cross' can be a lagging indicator and may not always accurately predict long-term bearish trends.

Recent developments have presented a mixed picture for Games Workshop. In May, the company released its FY25 guidance, projecting a profit before tax (PBT) of approximately £255 million. This figure exceeded market expectations, which had hovered around £240 million. However, the company tempered this optimistic forecast with a warning that exceptional licensing revenue from the ‘Space Marine 2' video game might not be sustainable in FY26. Subsequently, the stock experienced a 3.15% decline, reflecting market apprehension surrounding future licensing revenue streams.

Prior to the FY25 guidance update, Games Workshop had delivered an upbeat trading update in March, highlighting stronger-than-anticipated performance in January and February. This positive news prompted a revised PBT forecast, surpassing earlier estimates and sending the stock price soaring by 7%. The surge reflected robust performance across both the company's core operations and its licensing segment.

Also in March, fueled by expectations of exceeding FY25 profit forecasts, Games Workshop shares reached a record high of 14,970 pence. Market observers attributed this peak to strong momentum in the company's core business and royalty income, further boosted by a recent partnership with Amazon.

In October, Games Workshop announced a dividend of 55 pence per share, bringing the total dividend payout for the 2025/26 fiscal year to £1.40 per share. This decision underscored the company's confidence in its financial standing and its commitment to delivering value to its shareholders.

The interplay between technical indicators and fundamental performance paints a complex picture for Games Workshop. The ‘death cross' suggests caution, while strong financial results, strategic partnerships, and shareholder returns provide a counterbalance.