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Ubisoft shares slump 20% after French video game maker warns on revenue
Global Banking & Finance Review®
Company
By Dominique Vidalon
PARIS (Reuters) -Shares in Ubisoft fell 20% on Thursday after the French video game maker warned on revenue and postponed the release of its game “Skull and Bones”, prompting analysts to cut their estimates and price targets.
Late on Wednesday, Ubisoft said that it was increasing its writedown estimate to 500 million euros ($538 million) from 400 million and cutting its full-year revenue target after ending 2022 with weaker-than-expected sales.
Ubisoft cited the deteriorating economy, marked by lower spending on non-essential goods.
JP Morgan analysts in a note cut their rating on Ubisoft to “neutral” from “overweight”, citing “a weakening macro, a challenging industry environment and the lack of visibility regarding the timing of releases and their potential success”.
Several analysts noted that another negative factor was a shift in the video game industry towards mega-brands and away from small and mid-tier games.
“We have felt for several years that Ubisoft was devoting far too much money towards non A-tier franchises (such as Skull & Bones)”….Macro or not, there is still plenty of room for big performance if you have the right product…Ubisoft clearly needs to refocus its efforts,” Cowen analysts wrote.
They reiterated their “market perform” rating on Ubisoft and cut their price target to 22 euros from 34 euros.
Morningstar analysts cut their fair value estimate on Ubisoft to 35 euros from 60 euros “to account for the revenue drop, lower top-line growth, and potential further game delay”
Ubisoft shares were down 19.48% at 19.38 euros as of 0808 GMT.
(Reporting by Dominique Vidalon, Pitr Lipinski; editing by Benoit Van Overstraeten and Jason Neely)
A writedown is a reduction in the book value of an asset, often due to a decrease in its market value. Companies may record writedowns to reflect losses and adjust their financial statements accordingly.
Revenue is the total income generated by a company from its business activities, typically from the sale of goods and services before any expenses are deducted.
A price target is an analyst's projection of the future price of a stock, based on their analysis of the company's performance and market conditions. It helps investors make informed decisions.
The macroeconomic environment refers to the overall economic conditions that influence the performance of an economy, including factors like inflation, unemployment, and economic growth.
A neutral rating indicates that an analyst believes a stock will perform in line with the market average, suggesting that investors should neither buy nor sell the stock.
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