CD Projekt reports 88% jump in first-half profit

Investing.com -- CD Projekt (WA:CDR ) on Wednesday, reported an 88% surge in its first-half net profit on Wednesday, largely fueled by a surge in sales of its flagship game, Cyberpunk 2077.

The company posted a net profit of 170.0 million zlotys, while revenue for the first half of the year grew by 31%, reaching 424.8 million zlotys. 

Sales of "Cyberpunk 2077," including its "Phantom Liberty" expansion, soared by 81% to 257.7 million zlotys.

Analysts at Citi Research pointed out that expenditures on new projects decreased significantly by 38% year-over-year, yet saw a 13% increase quarter-over-quarter. 

They also added that operating cash flow (OCF) was up significantly year-over-year but had declined sharply quarter-over-quarter, suggesting some volatility.

CD Projekt also announced that it is preparing to move into the full production phase of Project Polaris (NYSE:PII ), the first installment in the new Witcher series.

Several risks could influence CD Projekt's ability to reach the target price of ZL 99 per share. Upside risks include stronger-than-expected monetization of Cyberpunk 2077 (CP2077), robust sales of the upcoming CP2077 DLC, and an earlier-than-expected release of the next AAA title based on the Witcher franchise, analysts at Citi said. 

Additionally, improved visibility of long-term earnings and a sudden depreciation of the Polish Zloty (PLN) against the US Dollar, which would boost Zloty-denominated sales and margins, could positively impact the stock.

Conversely, downside risks include potential appreciation of the Zloty, which could negatively affect top-line revenue and profitability. 

Other risks include the potential cancellation of the IP Box tax relief by the government, delays in the company's long-term production plans, and rising labor costs, particularly in securing adequate teams for planned game development.

Source: Investing.com