Capcom: Record First-Half Profitability, Sector-Low Valuation, And 40% Upside (Rating Upgrade)

2025-11-17 23:34:48 ET

Investment Thesis

I am upgrading my rating for Capcom (CCOEY) (CCOEF) from a buy rating to a strong buy rating because the company continues to demonstrate a superior business model that is driven by recurring catalog unit sales, superb margin expansion, and a disciplined allocation of capital. Its digital contents segment of revenue delivered record profitability for the first half of the year, and the growing strength of its amusement equipments segment of revenue, along with its arcade operations, reinforces the company's diversified, multi-channel IP monetization that only a few gaming publishers are able to replicate successfully. On top of all this, the company currently trades below the gaming sector's median EV to EBITDA multiple, and my updated 12-month price target of $17.47 implies 40.2% upside from its current price—the same amount of upside the company saw from April 2024 to January 2025. Thus, I believe the market is undervaluing this high-margin, low-reinvestment company, especially given their upcoming major catalysts for 2026 that include Resident Evil Requiem, Monster Hunter Stories 3: Twisted Reflection, and their upcoming Street Fighter film slated for release on October 16, 2026....

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