ATVI - HSBC upgrades Ubisoft to Buy seeing positives ahead in core strategy focus

2023-03-22 13:14:48 ET

Videogame maker Ubisoft's stock ( OTCPK:UBSFY ) took a January double-digit hit as the company warned on profit risks, slashing its guidance and increasing writedowns and cancellations - but a new strategy means it's time to focus on the positives to come, HSBC says in upgrading the stock to Buy.

Ubisoft's U.S. shares fell nearly 14% that day as it killed three projects (after canceling four others last July) and said that its high-profile release of Skull and Bones would be delayed .

Focusing its attention on core intellectual property - notably Assassin's Creed, Far Cry, and three entries in the Tom Clancy warfare franchise - should help the company cut costs and create opportunities for monetization, analyst Ali Naqvi said.

That's an approach that stronger rivals like Activision Blizzard ( ATVI ) have shown can work, provided good execution, Naqvi said, even if Ubisoft is currently a bit "behind the curve."

HSBC is now valuing Ubisoft using average price/earnings multiples from major peers in the U.S., with a target of 19.8x (up from 10.5x), with a 25% discount for potential execution risk.

That has the bank arriving at a new target price of €26, up from €21 and now implying 17% upside.

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