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Bank upgrades Ubisoft

September 26, 2023

Investment bank Exane/BNPP has issued an examination of games publisher Ubisoft, and the result is an upgrade (from ‘Neutral’ to ‘Outperform’) and a significant increase in its guide price target from €27 to €37.

The bank’s report says it has become more comfortable with Ubisoft’s equity story, given solid leading indicators for the top franchise (notably R6 Siege), solid FY 25 prospect (including highly anticipated Star Wars: Outlaws) and evidence that the new strategy (focus on core IPs, non-variable cost reduction) is advancing well. In particular the report says that after 3 years of soft momentum and poor execution Ubisoft has now entered a period of recovery with various positive catalysts.

“We have revised our estimates up by 7 per cent and now sits at about.15 per cent above consensus. There could be even more upside potential through ‘Free to Play’ initiatives (we assume limited contribution), AC Jade mobile game and partnership with MSFT to stream Activision-Blizzard games,” said the bank.

The report continues in a similar buoyant mood. “Strong leading indicators gives confidence in FY 24 guidance (c. +5 percent above consensus.) “Considering the solid start for ‘The crew Motorfest’ (best start for the franchise), R6 Siege’s skyrocketing leading indicators (steam players +40 per cent in Q3, of which +65 per cent in September), and solid hands-on previews for Assassin’s Creed Mirage, we feel comfortable with company guidance (€400 million adj. EBIT), despite not including the 5th unannounced AAA game for FY24.”

BNPP explained why it is optimistic, saying “Good upside on FY 25 estimates, driven by strong back catalogue and Star Wars: Outlaws. We now sit about 15 per cent above consensus estimates for FY 25. We think the market underestimates both the contribution from new game releases (Star Wars: Outlaws, AC Red) and strong growth in the back catalogue (c.+40 per cent), which should be fuelled by FY 24 releases and R6 Siege.”

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