Bernstein cuts Ubisoft stock numbers as 'full takeout prospects seem to fade'

On Tuesday, Bernstein analysts downgraded their estimates for Ubisoft Entertainment SA (LON:0NVL ) following the company's recent performance warning.

The downgrade reflects concerns over the €80 million net bookings miss in the third quarter and skepticism regarding the company's revised net bookings guidance for fiscal year 2025 (FY25).

Ubisoft (EPA:UBIP )'s management had previously lowered its FY25 net bookings guidance by €50 million, but Bernstein analysts are wary, doubting that the underperformance of "Star Wars Outlaws" will improve in the final quarter. Additionally, they anticipate that the one-month delay in the release of "Assassins’ Creed - Shadows" will negatively impact current year net bookings.

In response to these factors, Bernstein has reduced its net bookings estimates by approximately 5% across the forecast sequence, now modeling FY25 net bookings at €1.85 billion, which is 3% below the company's revised guidance of €1.9 billion.

They have also lowered their non-IFRS EBIT margin projections by over 400 basis points in the near term, resulting in an expected FY25 non-IFRS EBIT margin of -4.7%. This adjustment accounts for negative economies of scale, which may be partially mitigated by further cost reduction efforts.

While Ubisoft is exploring strategic options, including potential asset disposals into a joint venture with Tencent, Bernstein remains cautious. They note that a full acquisition scenario may be challenging due to the current geopolitical context. Despite this, the analysts have applied a reduced risk premium to Ubisoft's equity, factoring in the likelihood of at least a partial disposal in the near future, which could give Ubisoft time to restructure and manage its debt.

Bernstein's valuation of Ubisoft in a "deal/partial deal" scenario has decreased to €10.1 per share, mainly due to the lowered estimates. Without a deal, the analysts warn that there could be further downside for Ubisoft shares, potentially falling below €5.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Source: Investing.com