On Friday, TD Cowen analysts revised their price target on Ubisoft Entertainment SA (LON:0NVL) (UBI:FP) (OTC: UBSFY (OTC:UBSFY)) shares, reducing it from EUR15.00 to EUR14.00, while maintaining a Hold rating. The stock, currently trading at $2.53, has experienced a significant decline of nearly 48% over the past six months. The adjustment follows Ubisoft (EPA:UBIP)'s announcement of pursuing strategic options, another delay of its game "Assassin's Creed: Shadows" to March 20, and a decrease in its bookings guidance for the fiscal third quarter.
TD Cowen's analysts expressed skepticism regarding significant changes in Ubisoft's situation, noting that potential buyers have had ample opportunities to engage with the company in recent years.
According to InvestingPro data, despite operational challenges, the company maintains impressive gross profit margins of 90% and a healthy current ratio of 2.32, indicating strong liquidity. The analysts highlighted the possibility that any acquisition could disproportionately benefit the Guillemot family, who founded Ubisoft, over external shareholders, drawing a parallel with a similar situation at Paramount.
The analysts anticipate that Ubisoft's operational challenges will persist, pointing out that despite layoffs, there has been little change in management. As a result, TD Cowen has updated its financial estimates for the company, lowering its fiscal year 2025 bookings forecast from €1.95 billion to €1.89 billion, and adjusting its EBIT projection from a loss of €3 million to a loss of €16 million.
The revised price target of EUR14.00 reflects a 10x multiple on the firm's estimated FY27 EBITDA for Ubisoft, which is lower than the multiples given to other video game companies. This valuation is based on TD Cowen's concerns about Ubisoft's management's ability to enhance the company's performance. InvestingPro analysis suggests the stock is currently undervalued, with 8 additional exclusive insights available to subscribers. Discover more detailed valuation metrics and company health indicators at InvestingPro.
In other recent news, Ubisoft Entertainment SA has experienced significant changes in its financial outlook, stock ratings, and potential buyout discussions. The company's financial performance in the first half of fiscal year 2025 showed net bookings falling by 21.9% to EUR642.3 million, and a non-IFRS operating loss of EUR252.1 million was reported.
Despite the weaker financials, CFRA upgraded Ubisoft's stock from a Sell to a Hold rating and increased the price target to EUR14.00, influenced by rumors of a potential buyout by Guillemot Bros Limited and Tencent.
Stifel downgraded Ubisoft's shares from Buy to Hold, setting the price target at €13.00, reflecting a revised outlook on the company's investment potential. The downgrade was announced following concerns about Ubisoft's development pipeline for the calendar year 2025 and fiscal year 2026.
Meanwhile, Ubisoft's shareholders, including the founding Guillemot family, are reportedly in discussions regarding a potential buyout of the company. Tencent Holdings Ltd (HK:0700) (F:NNND), a major shareholder, is also said to be considering its options in these discussions.
Simultaneously, Ubisoft has faced pressure from minority shareholders for a private takeover or sale to a strategic investor. This comes amid a broader evaluation of Ubisoft's strategic direction and the cancellation of its XDefiant game, leading to the closure of its production studios in San Francisco and Osaka and a scale-down in Sydney.
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