Ubisoft’s earnings results meet with muted response

While Ubisoft’s share price is a far cry from last year’s lows, its recent earnings announcement failed to inspire investors.

Ubisoft has reported solid growth in  its earnings report for the first half of 2018. Net bookings came in at €746.1 million, up 60% year on last year. Digital net bookings also continued to increase, coming in at €519.2 million, up 51.1%.

Investor reaction was, however, tepid, with the stock losing 4% in value at the start of Wednesday’s session before rallying slightly to close at €79.76.

Despite this, the share price is in better shape than this time last year when it traded for around $65.

Triple-A growth

Pushing the share price upwards has been the release of triple-A titles Assassin’s Creed Odyssey and Far Cry 5.

Assassin’s Creed Odyssey, released in early October, was considered a return to form for the series. Taking it to the world of Greek myths, players hacked and slashed their way through polygon interpretation of Homer’s Odyssey.

While initial sales figures indicated it was underselling predecessor, Assassin’s Creed Origins, the share price spiked 6% after the Ubisoft announced Odyssey had had the best launch week for any entry in the series.

Ubisoft plans to further drive sales through high-margin digital downloads – an increasingly lucrative revenue stream for publishers.

“Launch is just the start of this epic journey,” said Geoffrey Sardin, President of Sales and Marketing at Ubisoft in a company update. “We have robust content plans for Assassin’s Creed Odyssey that will keep players engaged and exploring the  beautiful and compelling world for a long time to come.”

This is a smart move. With no new Assassin’s Creed game in 2019, the publisher will be keen to ensure one of its biggest franchises continues to be a revenue generator next year.

The success of the Odyssey comes off the back of huge sales for Far Cry 5. The latest entry in the first-person shooter became the second-biggest release ever for the company when it was released in March. Like Odyssey, digital distribution accounted for 50% of sales.

Five days after Far Cry 5’s release the share price had gone from $68.54 to $73.86 (up 7.7%) as strong sales figures came in.


ubisoft share price since 2017
Source: Yahoo Finance, 30.10.2018

Will Ubisoft expand further into mobile gaming?

One area Ubisoft has struggled is mobile gaming. Last year it got just 8% of sales from mobile offerings – compare this against Nintendo who believe that mobile gaming could represent $900 million worth of business.

Rumours are circulating that the company is among those considering a purchase of Zynga, the makers of the popular smartphone game Farmville. The acquisition would also allow Ubisoft access to Zynga’s online advertising platform where it could leverage pre-existing video games.

Taking on the mobile publisher would require Ubisoft to take on substantial debt to fund the purchases, estimated to be worth around $4 billion. There is also the threat of another major publisher, such as EA, gazumping Ubisoft.

Where next for the share price?

Early next year will see the release of The Division 2, a sequel to Ubisoft’s all-time best seller. There is also the much-anticipated Beyond Good and Evil 2 and a rumoured entry into the Splinter Cell series after an absence of six years.

Whether these two series are still relevant to gamers will be a major factor in sales, and the share price.