Text size
Kenzo Tribouillard/AFP via Getty Images
Ubisoft
Entertainment’s plan to launch five videogames this fiscal year was always ambitious, so it is no shock that the French publisher will delay two games until fiscal 2022.
Yet the news, disclosed Thursday along with Ubisoft’s (ticker: UBSFY) quarterly financial results, is still a negative development. Wall Street analysts have begun to alter their financial models, and at least one downgraded the stock.
Benchmark analyst Mike Hickey wrote in a brief note to clients Friday that his call on the name is now a Hold, compared with a Buy before the delays. Hickey said that the earnings were better than expected, but that the company lowered its forecasts for fiscal third-quarter sales, as well as profitability and revenue for the fiscal year.
Barron’s has written positively about Ubisoft, along with three of the U.S. publishers, citing the company’s aggressive plan to release big games. Even though Ubisoft has delayed the next iteration of Far Cry and Rainbow Six Quarantine because of the Covid-19 pandemic and associated production challenges, the future for publishers looks bright. Both titles are being pushed into Ubisoft’s fiscal 2022.
Dan Niles, founder and portfolio manager of the Satori Fund, a tech-focused hedge fund, told Barron’s over the phone Friday that he hasn’t changed his bullish view on the videogame sector overall. He has, however, sold Ubisoft stock, saying the shares had run up enough that it was time to take a profit.
“Ubisoft will be fine,” Niles says. “Every single company has always had some kind of delay at some point in time. Is it a setback? Obviously, but it’s good for the rest of the companies. In the near term, expectations for Ubisoft will need to be ratcheted down.”
For Niles, Ubisoft’s stumble means that other publishers such as
Activision Blizzard
(ATVI),
Electronic Arts
(EA), and
Take-Two Interactive Software
(TTWO) will get a boost in the near term, especially if they have fresh titles to release.
In a note to clients Thursday, Jefferies videogame analyst Ken Rumph wrote that three games will have to now do the work of five—referring to Ubisoft’s original launch calendar. The back catalog has been pulling its weight, Rumph wrote, citing as evidence the fact that Ubisoft’s revenue was higher than expected.
Rumph also pointed out that the forthcoming, widely anticipated Cyberpunk 2077 from Polish publisher
CD Projekt
(OTGLY) was delayed a further 21 days, which makes Ubisoft’s news more palatable.
Ubisoft American depositary receipts have advanced 27% this year, as the S&P 500 index rose 0.4%.
Write to Max A. Cherney at max.cherney@barrons.com
