Ubisoft: Not Expecting Much In Q4, Risks On The Horizon For 2025

seekingalpha03-19

Ubisoft and Embracer are both terrible performers for some years and worth studying. We see a recent history of poor handling of otherwise attractive IPs, and greedy practices.Ubisoft is hyping up the...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2420219963?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1173705137/image_1173705137.jpg","is_english":true,"pubTime":"2024-03-19 16:13","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2420219963","market":"hk","top_or_hot":-1,"title":"Ubisoft: Not Expecting Much In Q4, Risks On The Horizon For 2025","media":"seekingalpha","content":"<div>\n<p>Ubisoft and Embracer are both terrible performers for some years and worth studying. We see a recent history of poor handling of otherwise attractive IPs, and greedy practices.Ubisoft is hyping up the...</p>\n\n<a href=\"https://seekingalpha.com/article/4679064-ubisoft-stock-not-expecting-much-q4-risks-looming-2025\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Ubisoft: Not Expecting Much In Q4, Risks On The Horizon For 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUbisoft: Not Expecting Much In Q4, Risks On The Horizon For 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-19 16:13 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4679064-ubisoft-stock-not-expecting-much-q4-risks-looming-2025><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Ubisoft and Embracer are both terrible performers for some years and worth studying. We see a recent history of poor handling of otherwise attractive IPs, and greedy practices.Ubisoft is hyping up the...</p>\n\n<a href=\"https://seekingalpha.com/article/4679064-ubisoft-stock-not-expecting-much-q4-risks-looming-2025\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4524","symbol_name":"宅经济概念","start_time":0,"source_url":"https://seekingalpha.com/article/4679064-ubisoft-stock-not-expecting-much-q4-risks-looming-2025","article_id":"2420219963","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1173705137/image_1173705137.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2420219963","pubTimestamp":1710836024,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Ubisoft and Embracer are both terrible performers for some years and worth studying. We see a recent history of poor handling of otherwise attractive IPs, and greedy practices.Ubisoft is hyping up the","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4524":"宅经济概念","BK4220":"综合零售","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","BK4535":"淡马锡持仓","BK4527":"明星科技股","OTGLF":"CD Projekt SA","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","BK4503":"景林资产持仓","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","TTWO":"Take-Two Interactive Software","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","BK4581":"高盛持仓","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","BK4085":"互动家庭娱乐","AMZN":"亚马逊","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","LU0238689110.USD":"贝莱德环球动力股票基金","LU0109391861.USD":"富兰克林美国机遇基金A Acc","BK4548":"巴美列捷福持仓","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","LU0234570918.USD":"高盛全球核心股票组合Acc Close","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","SGAMY":"Sega Sammy Holdings, Inc.","LU0072462426.USD":"贝莱德全球配置 A2","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","EA":"艺电","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4554":"元宇宙及AR概念","BK4592":"伊斯兰概念","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4532":"文艺复兴科技持仓","LU0080751232.USD":"富达环球多元动力基金A","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","LU0061474960.USD":"天利环球焦点基金AU Acc","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","LU0234572021.USD":"高盛美国核心股票组合Acc","BK4534":"瑞士信贷持仓","UBSFY":"UbiSoft Entertainment Inc.","BK4533":"AQR资本管理(全球第二大对冲基金)","THQQF":"Embracer Group AB"},"translate_title":"育碧：对第四季度不抱太大期望，2025年风险在望","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"UBSFY":1,"AMZN":1,"EA":1,"OTGLF":1,"THQQF":1,"SGAMY":1,"TTWO":1},"content_text":"Ubisoft and Embracer are both terrible performers for some years and worth studying. We see a recent history of poor handling of otherwise attractive IPs, and greedy practices.Ubisoft is hyping up the Q4 on the back of Skull and Bones, which has not been received well. They are also putting their chips on another live service shooter.Their investment areas of live service are saturated, risky and could go low ROI. We don't think there is much chance of positive news in the Q4.Boycott risks are somewhat remote but could be dangerous, and should be watched carefully.There isn't a major valuation case, and we'd maybe just go with more solid companies in the space that have comparable valuations, or even bottomfeeding with Embracer.BalkansCat We've noticed in our coverage that there has been exceptionally poor performance of some of gaming's largest franchises since the 2021 boom, but also since before the pandemic. Therefore, some of it can of course be explained by slowdowns in performance from when COVID-19 made a captive market for gaming companies, the factor that probably comes in for the stalwarts like Electronic Arts (EA) and Take-Two (TTWO), but it also comes down to the fact that there has been a lot of franchise fatigue going on, and IP handling has been poor in some cases. For some of these companies, this is an incredible fall from grace, since many are in control of flagships that dominated the space for years and could have easily been the font of great sequels and spinoffs for much longer and more vigorously than they have been. Data by YCharts The two worst performers are Embracer (OTCPK:THQQF) and Ubisoft (OTCPK:UBSFY). We've covered the former but not the latter. The summary is that we think expectations for the Ubisoft Q4 will possibly go wrong on the back of bad reception of Skull and Bones, which the company is hyping up a lot on the call, as well as the weird move to go all-in on live service games which are supersaturated. Also, we see competitive risks and even boycott risks on the horizon for 2025, which is supposed to be a big Assassin's Creed year. Comps won't be that easy with Mirage having released this year either. Ubisoft is crudely a higher valuation than Embracer too, which may not be very justified. More importantly, on the back of possible disappointments, we don't see a strong case for buying Ubisoft right at this moment. The Thesis The question to answer is whether some sort of inflection in performance can be expected from either since both would benefit meaningfully from any sustained change in the quality of releases. Embracer has a major issue which is that it is capitulating on studio investments it's made in the last couple of years, and a lot is riding on an MMO that they want to make on LotR (Lord of the Rings, now their IP) with Amazon (AMZN), rather than singleplayer games from franchises that have a much surer following and can be monetised upfront. A lot can go wrong with an MMO style game, including ongoing operational issues, launch issues, engagement issues that all impact how profitable the development of such a project turns out to be. These games can die in weeks even after a successful launch. Embracer is selling some of its best studios like Gearbox, at least that is what is speculated, as well as Saber Interactive, which has a lot of imminent releases that could have carried the company's gaming segment. In other words, we don't have good expectations from Embracer as of today since they are shedding some of their most promising studios and pipelines. Ubisoft is a bit different, as most of the major franchises have been built organically and they have a long history in the gaming space. Obviously, they have the Assassin's Creed franchise, which has gone from being a stealth-based series to an open world RPG game series with relatively unengaging open world content, now passe' with the consumer being back on story-driven adventures likely spearheaded by the indie studios and their better games on smaller budgets which couldn't handle larger projects. AC: Mirage was an attempt to come back to \"making good games\", which they could have been doing since the beginning as they were quite well rewarded for that release. They also have other franchises like Watch Dogs, which started with some controversy about 10 years ago over an E3 debut and the evidence of obvious downgrading, which has also been driven into the ground with Watch Dogs Legion poorly received and not a very good game. They even came out with a game called Skull and Bones which is an embarrassment at launch, often being compared with Assassin's Creed: Black Flag which featured pirate gameplay that was more engaging than in this dedicated pirate game. When thinking about Ubisoft, the last 10 years have been a long chain of gaffes and relative failures. The Division disappointed everyone when Ubisoft was at the height of its powers in 2015. AC: Unity was a disaster at launch leading to AC: Syndicate which while a decent game sold poorly on that broken goodwill. Possibly the only major success is Rainbow Six Siege, which has really held its place in the competitive live service market, and it's a game that's still able to recruit interest. The Far Cry franchise has held on a while longer, after the very strong entry of Far Cry 3, but things have dipped badly on Far Cry 6, again with more downgrading accusations. It's not a well-liked company by the community and hasn't been for around 10 years. In the recent performance, the back catalogue was very strong, with Rainbow Six Siege, which is their main live service title, continuing to generate good bookings and generate engagement that is growing YoY. Assassin's Creed also benefited thanks to Ubisoft sales on various platforms in conjunction with the Mirage release and the halo effect that has on the franchise. Net Bookings (Q3 PR) The release of Skull and Bones will feature in the coming quarter. They claim that it was well received and was generating increasing interest, but it's not. It is not a well-liked game and it will disappoint. Also, it was priced highly at $60, despite being live service, and in combination with revulsion from the community it will struggle to get people paying up for it. Sadly there's no Steam data to provide on it, which is an issue in general with Ubisoft as a lot of their PC releases are exclusive to their own platforms, and they don't often use Steam. The Crew Motorfest has done pretty well, apparently generating more engagement than the previous entry. Of course, Mirage has performed pretty well itself, and the new Prince of Persia game, The Lost Crown, which saw little success in the 2010s, seems to have worked as a Metroidvania and is quite well received. While a positively received revival, it's not clear yet how much this actually sold as the format is more niche. Also, we've seen reports that apparently it's not sold well at all, so it may disappoint too. Net bookings are already run-rate quite weak relative to last year despite some major releases like Mirage, and we already have two possible disappointments coming in the next earnings between Lost Crown and Skull and Bones. Live service HYENAS by Sega (OTCPK:SGAMY) was cancelled. Besides the Skull and Bones game being specifically disliked, the live service space is a low ROI area at this point. They are also talking about XDefiant which has just been released, another live service game. We heard there were some issues with matchmaking, but more importantly, we simply want to turn and run when we hear about another live service shooter. The market is unbelievably saturated. Why else would Sega cancel a finished HYENAS? Expectations are low here, and this is while Ubisoft is guiding for record bookings in Q4 to round out FY 2024. We think the likelihood is high that this does not occur and that catalysts are lacking in the near term. The bigger releases are coming next year in FY 2025. It's going to be Assassin's Creed Codename Red and Star Wars Outlaws. Codename Red is going to be in feudal Japan which has been a long-awaited geography for the series with a lot of narrative potential. It will be another open world entry, we are quite concerned about that since while relatively well liked in its latest installment of AC: Valhalla, the open world formula is getting altogether tired, and the way Ubisoft has done it, although better now than in early entries, does involve some concerning tactics to try to get people in the Helix Store to make the game go faster. Star Wars Outlaws offers major possibilities being the first ever open-world Star Wars game outside of some Star Wars MMOs. It's an example of Ubisoft using outside IPs, like the new Avatar game. Also, to comment on the Avatar game, an analyst on the call pointed out that the new release bookings looked a little weak, and that is consistent with how the game was marketed, i.e. not marketed much. Shortfalls may have come from the weak performance of the Avatar game. It won't have a long tail probably. Our concern around the FY 2025 pipeline is that besides questions around the quality of those games amid possibly low morale and restructurings, on top of what we'd state is a poor track record of Ubisoft, is that 2025 is going to be a competitive year with GTA VI coming out among others. Ubisoft on the call tried to claim that the launch of GTA VI would grow the pie for everyone. No, it will not. That will be a game that will engage the audience away from other titles, absolutely, not only for what will likely be a strong singleplayer experience but also because of whatever multiplayer experience they'll cook up for players at Rockstar. However, we do also acknowledge that FY 2025 on paper should be a bigger year than this year was, although as we detailed there are ways for this to go wrong as well. The company is undergoing a restructuring, much like Embracer although not as extreme yet. But it signals that there is a major pressure in the industry, and layoff waves have been significant in other parts of the space as well, and at companies like Embracer they are only growing although it might be primarily exacerbated by the financial situation - quite a lot of leverage. Bottom Line With such precipitous declines, it's worth evaluating as investors whether any action can be taken here. The issue is that eroding reputation and poor handling of IPs tend to be a one-way street. Both Embracer and Ubisoft have this issue, where at least Embracer, being a Frankenstein's Monster of different studios, is a little more anonymous in its recent failures, such as Payday 3. Embracer also at least has a boardgames segment that isn't that affected by the same issues and has been a bright spot in terms of performance, as well as a mobile gaming segment where all the games are basically fads, cheaper to develop and quality matters less. There are also boycott risks and backlash risks against any development choices that appear to cater to a \"modern audience\", which has been a practice that has for the most part not paid off at all yet has persisted for years. In fact, there has been a recent discussion point around boycotts concerning the use of DEI consulting companies. The followings for these boycott pages on Steam are in the hundreds of thousands, so the risk here is credible, and both Star Wars Outlaws, Codename Red, and Lost Crown feature on these boycott lists. If calls for boycotts grow rather than die out for 2025, that could start becoming a major headwind for the company, where a lot of expectations are going to be tied up in 2025. More generally, much like in the beverage industry, craft or indie products are beginning to take share even as a fragmented front. Moreover, there are the big players in the space, armed with Franchises like GTA or FIFA that are cash cows that can help finance more large projects and try to crowd out somewhat more tier-2 players like Embracer and Ubisoft from the markets, even though Ubisoft really has some of the better-known franchises out there. Ubisoft and Embracer are caught between a golden horde of releases in the Double-A gaming space, things like Helldivers 2 and Larian's releases like Baldur's Gate 3 (we didn't like it but the passion was clear) and the powerhouses that are difficult to siege at the top of Triple-A. We already made our thoughts on Embracer clear: capitulations with studio sales with loaded pipelines are mistakes, and take away future earnings power of the business. For Ubisoft, we are also negative: expectations guided by the company are for a strong Q4, and we think Skull and Bones, which has been thoroughly criticised, will fail to deliver. We also think that putting their chips on live service is crazy given how saturated the space is and how late they are to the party. They are lucky to have Rainbow Six. How will they compete with EA's Apex Legends or even Activision Blizzard's CoD: Warzone, to name just a few of the many with XDefiant? Finally, we are quite worried about boycott risks, which are surely not being noticed by Wall Street at this point or by the other analysts who cover the stock, as it could affect some of the biggest upcoming releases. Finally, FY 2025 is going to be a tough year to compete in with games like GTA VI crowding in on AC's singleplayer appeal with an established audience and history of engagement with GTA Online as well. In other words, we see immediate issues and we see issues for the FY 2025 releases that are going to be expected to carry results. In terms of valuation, it's tough to choose a comp. Crudely, they are cheaper than EA on a PE basis at 17x compared to 29x, but that makes perfect sense as EA is a better-positioned company. Compared to CD Projekt Red (OTCPK:OTGLF) which also focuses on singleplayer experiences, they are similarly valued this year at around 17x based on our crude forecasts, but CDPR has a weaker 2025 pipeline. Embracer's financial situation is too different for PE comparisons, but it's traded to a similar tune, so in terms of EV/EBITDA, Ubisoft is at 3.5x compared to Embracer's 3.0x. Honestly, we might prefer Embracer at this point. They have some upcoming catalysts with the LotR MMO, and that could generate some engagement because interest in other MMOs wanes pretty quickly so it's easier to compete here. At least with Embracer the financial picture already has analysts concerned about debt, so expectations probably can deteriorate less than they can for Ubisoft, especially if rates eventually fall. Embracer is quite levered to ECB policy. They also have a strong mobile segment, as well as board games, both of which have a major part in the mix and fewer IP handling concerns and other execution and human capital risks. Ubisoft being more expensive than Embracer is a little bit of a concern for us in terms of relative valuation, on top of the concerns around direction. Pass.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2420219963"}