Bank issues ‘Hold’ advice on Ubisoft
July 23, 2022
Ubisoft Entertainment’s latest set of results revealed delays to some key game releases and a cut to the company’s future guidance. But investment bank Berenberg maintained its ‘Hold’ advice to investors in its July 22nd Flash Note. The company has a number of well-known games in its portfolio, such as Assassins Creed.
Ubisoft says an agreement has been made with a mobile distributor and analysts have hinted that the potential partner could include Netease, Take Two/Zynga, or Netflix.
Delays will affect Avatar: Frontiers of Pandora into 2024 and a probable delay to Assassins Creed Rift into 2024 although Ubisoft says its Skull & Bones is still scheduled for release this’ November, but management has pointed to the uncertain environment and has rebased its expectations, meaning it now expects lower revenues from Skull & Bones and FY 2023 free-to-play releases, says Berenberg.
The bank said that Ubisoft’s FY/2023 Q1 net bookings of €293.3 million were in line with its forecast of €291.8 million, but ahead of consensus’s €281.8 million and management’s outlook of c€280 million. However, the outlook for net bookings of c€270 million is well below consensus of €386.4 million, so forecasts are likely to be cut for the period. Likewise, the FY/2023 net bookings outlook for significant growth was redefined to mean “more than 10 percent” compared with the previous “more than 20 per cent” as a result of management’s decision to delay Avatar: Frontiers of Pandora into FY 2024.
“Ubisoft did however announce a “new high-value licensing partnership on mobile” for one of its AAA brands. The remarks on the call implied that the partnership has been signed with a technology or entertainment company, reflecting the theme of consolidation across the industries. The revenues that Ubisoft will receive for the year are fixed and will represent the key driver towards achieving the downward revised 10 per cent growth target. This will be key as a back-of-the-envelope calculation implies that the outlook for Q2 would leave the company requiring net bookings of c€1.8 billion – its record half-year result – just to reach the bottom end of the range, despite having pushed one of its two AAA titles out of the period. Little detail has been shared on the agreement, for competitive reasons, so it will be difficult for analysts to predict the top-line and EBIT impact, although the FY 2023 outlook for EBIT of c€400 million has been reiterated based on the signing of this deal,” adds the bank.