Berenberg loses confidence in Ubisoft Entertainment


Ubisoft Entertainment SA has been downgraded to ‘hold’ by European investment bank Berenberg which says it is less optimistic about cash flow and execution.

Analyst Jamie Bass noted that recently announced first-half bookings were ahead of market consensus but earnings fell short – and that investor focus was on the outlook for the full year which will be dependent on the performance of Far Cry 6 and Rainbow Six Extraction game titles out in the third and fourth quarter respectively.

Bass highlighted that Ubisoft saw continued strength for its Far Cry and Assassin’s Creed Valhalla sales, but, its outlook would be impacted as three games are delayed into next year.

“After another set of earnings consisting of game delays and a guidance downgrade – we have become less confident about Ubisoft’s ability to execute,”

“Having overhauled our capex modelling, we find that the cash R&D impact on free cash flow (FCF) is worse than we had previously anticipated over the medium term.”

The analyst added that Ubisoft won’t be free cash flow generative until the 2025 financial year and whilst growth is expected thereafter, Bereneberg is now more concerned because of the recent track record of production delays.

“We recently hosted Ubisoft for a fireside chat at our Video Games Conference and came away feeling like there are plenty of exciting opportunities for Ubisoft in the coming years, but management has not improved our execution expectations; therefore, we move to the sidelines and downgrade to hold,” Bass said.

The bank’s ‘hold’ rating comes with a price target of EUR48.00, versus a market price of EUR47.18.


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