Editing Ubisoft Entertainment SA
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[[File:Ubisoft Stock Price.png|frame|none]] | [[File:Ubisoft Stock Price.png|frame|none]] | ||
Ubisoft's current share price is ~ €29 per share. Ubisoft has traded at a discount to peers over the past few years due to execution risk stemming from production delays, which constrains cash flows. While this is partly justified, it can be argued that the discount is oversized. | |||
Ubisoft's current share price is ~ €29 per share. Ubisoft has traded at a discount to peers over the past few years due to execution risk stemming from production delays, which constrains cash flows. While this is partly justified, it can be argued that the discount is oversized. | |||
=== Valuation === | === Valuation === | ||
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|€ 27.91 | |€ 27.91 | ||
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==== Investment Thesis ==== | ==== Investment Thesis ==== | ||
many new AAA games (strong lineup 2024), potential start of new lucrative franchises / IPs, appointed new independent board members with large successful track records to strengthen their corporate governance, risks around execution, which may significantly dampen upside potential of new franchises, which has been seen with e.g., Redfall, which was released by Bethesda earlier this year. | |||
Valuation is not demanding given the underappreciated strategy Ubisoft now trades at a 50% discount relative to gaming peers, which is far below the 5-year average discount of 33%. This current discount is seemingly driven by investors' perception of elevated execution risk at the company. Whilst Ubisoft should trade at a discount given its track record, we believe that the current discount is outsized and the market under-appreciates the potential of its new strategy and the associated transmedia effect, which offer upside risk. Whilst this strategy may take time to materialize as the company reorganizes itself, in our view, when the storm settles Ubisoft should benefit greatly | |||
Furthermore, Barclays reports that the largest AAA games have recently outperformed while smaller AAAs have underperformed: "Our 7 interviewees noted that improvements to the stickiness of the major games and their ability to keep gamers within their ecosystem were a major competitive factor in the AAA market. They also felt it was becoming more difficult to deliver success in 1-5m unit AAA games. They pointed to the squeezed consumer as exacerbating rather than creating this trend." This new trend reinforces the fact that Ubisoft's new strategy to focus on their core franchises, most of which are considered 'Mega games', synergises with structural changes in the industry and is the right path of action.<ref>Barclays. (2023) Ubisoft, Embracer and CD Projekt: Mega games getting bigger?</ref> | |||
==== Risks ==== | |||
== References == | == References == | ||
__INDEX__ | __INDEX__ |