Bernstein Reduces Ubisoft Estimates Amid Financial Concerns
Bernstein Downgrades Ubisoft's Financial Outlook
In a recent shift in their financial outlook, Bernstein analysts have revised their estimates for Ubisoft Entertainment SA (LON: 0NVL) following alarming news regarding the company's performance. This decision comes amidst a backdrop of strong market expectations and a competitive gaming landscape.
Concerns Over Missed Net Bookings
The crux of Bernstein's downgrade stems from Ubisoft's substantial miss of €80 million in net bookings during the third quarter. Such a significant shortfall has cast doubt on the company's revised net bookings guidance for the fiscal year 2025.
Management's Revised Guidance
Ubisoft's management had previously issued a lower net bookings forecast, slashing it by €50 million. However, Bernstein analysts are not convinced that the disappointing performance of titles like "Star Wars Outlaws" will improve as the fiscal year wraps up. They remain skeptical about the anticipated sales impact of the upcoming release of "Assassin’s Creed - Shadows," given its one-month delay.
Revisions to Financial Projections
In light of these developments, Bernstein has lowered its net bookings estimates by approximately 5% across the coming forecast periods. The firm now anticipates FY25 net bookings to reach €1.85 billion, which is 3% lower than Ubisoft's own revised guidance of €1.9 billion.
Impact on Earnings Projections
Moreover, Bernstein has reduced its projections for non-IFRS EBIT margins by a considerable margin, estimating a negative margin of -4.7% for FY25. This revised outlook reflects the challenges of negative economies of scale, although there is potential for some mitigation via cost-cutting initiatives.
Strategic Options and Market Context
Ubisoft is currently exploring strategic options, including the potential for joint ventures or asset disposals, particularly involving a partnership with Tencent. Despite these efforts, Bernstein analysts express caution over the feasibility of a full acquisition, given the complexities of the current geopolitical landscape.
Valuation Adjustments
As a result of the lowered estimates and prevailing uncertainties, Bernstein has adjusted their valuation of Ubisoft within a "deal or partial deal" framework, now pegging it at €10.1 per share. They warn that if no significant deal occurs, Ubisoft shares might face greater downward pressure, potentially sinking below the €5 mark.
Frequently Asked Questions
What led to Bernstein's downgrade of Ubisoft's stock?
Bernstein downgraded Ubisoft's stock due to a €80 million net bookings miss and concerns about their future performances, particularly after recent warnings from the company.
How has Ubisoft's management reacted to the downgraded guidance?
The management had previously lowered their guidance by €50 million but faces skepticism from analysts regarding the recoverability of their game titles.
What financial metrics did Bernstein adjust for Ubisoft?
Bernstein revised FY25 net bookings down to €1.85 billion and lowered their non-IFRS EBIT margin estimates significantly.
What strategic options is Ubisoft considering?
Ubisoft is reportedly exploring potential asset disposals and forming a joint venture with Tencent as part of its strategic options moving forward.
What could happen to Ubisoft's stock price without a deal?
If no deal materializes, analysts warn that Ubisoft's stock could decrease significantly, possibly dropping below €5.
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