Ubisoft (UBI) stocks up tanks after guidance cut, games cancelled

In this photo illustration the Ubisoft video game company logo seen displayed on a smartphone.

Igor Golovnev | SOPA images | LightRocket via Getty Images

Ubisoft Shares plunged as much as 21% on Thursday after the French video game maker lowered sales guidance, canceled three titles and delayed the release of its upcoming game Skull and Bones.

Shortly after the stock market opened, the company’s share price collapsed to EUR 18.80 per share, the lowest point in almost seven years. The stock later trimmed its losses slightly, closing at around $24.00, down 14% from Wednesday’s close.

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In a trading update on Wednesday, Ubisoft lowered its Q3 2022 net bookings guidance to €725 million, down from a previous target of €830 million. The company forecast full-year net bookings were likely to fall 10% after a previous forecast called for a 10% increase.

The company, best known for publishing hit franchises like Assassin’s Creed and Far Cry, cited the poor performance of its titles Mario + Rabbids Sparks of Hope and Just Dance 2023 as well as a challenging economic environment.

“There’s a whole lot that’s shutting the hatches globally in terms of the gaming industry,” Lewis Ward, IDC’s research director of gaming, told CNBC.

Ubisoft shares tumble after firm full-year revenue guidance was lowered

“When COVID hit, there were huge sales increases of 20% to 30%, and in 2023 we face the ongoing unraveling of COVID-induced spending surges, plus concerns about a possible recession and ongoing inflation and supply chain issues in North America and Europe above all, plus of course the ongoing aftermath of the Russian invasion of Ukraine.”

Consumers are reducing their discretionary purchases in response to higher prices and borrowing costs. Gaming has come under particular pressure. According to a November forecast by market research firm Ampere Analysis, the industry should shrink 4.4% year over year to $182 billion.

Ubisoft is the third gaming company to release a disappointing trading update this week. develop digital and Frontier Developments issued profit warnings on Monday, citing a weak trading environment in December.

“This shows that the macroeconomic environment is having some impact on premium game sales,” Piers Harding-Rolls, games research director at Ampere Analysis, told CNBC via email.

“However, I think it is likely that the economic background will affect some companies more than others,” he added. “For example, we’ve already seen how well the biggest AAA console releases have sold – FIFA, God of War, CoD [Call of Duty] – so I think it’s too early to assume that all major publishers will be in the same position as these three companies.”

The gambling industry is experiencing increasing consolidation, including Microsoft’s Mega acquisition of Call of Duty publisher Activision Blizzard and Sony’s purchase of Destiny developer Bungie.

Investors see Ubisoft as a potential takeover target. The share price fell by more than 38% in 2022, taking €3 billion off the company’s market value.

In September, Tencent increased its stake in the company in a deal that made Chinese tech giant Ubisoft its largest shareholder. The purchase gave Tencent an overall 11% stake, including indirect ownership, and an option to further increase its stake up to 17%.

Still, analysts said at the time that the stake purchase dampened takeover hopes. As part of the deal, Tencent cannot sell its shares for five years and cannot increase its direct stake in Ubisoft beyond 9.99% for a period of eight years.

Ubisoft said on Wednesday that it would write off around €500 million in activated R&D and narrow its focus to fewer titles. It shelved three unannounced game projects and delayed the release of upcoming pirate game Skull and Bones to sometime between early 2023 and 2024.

The company hopes to reduce costs by around €200 million through a mix of targeted restructuring, divestment of “non-core” assets and downsizing. It has around 1.4 billion euros in cash and tangible assets on its balance sheet.

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