Ubisoft Shares Decline Following Strategic Update

Shares of Ubisoft experienced a decline on Monday, following a strategic update that highlighted the company’s ongoing challenges and potential shifts in ownership.

In early trading, Ubisoft’s stock was down 2.4%, priced at €13.86.

According to analysts, there are reports suggesting that the Guillemot family, alongside Tencent, is considering the possibility of taking the gaming giant private. While this buyout speculation could offer some level of stability, it also raises concerns regarding broader interest in Ubisoft amidst its operational difficulties.

The gaming industry has seen a notable drop in potential buyers, particularly as interest from console manufacturers, major tech companies, and private equity firms has diminished since the peak of the pandemic. This decline in enthusiasm for expanding into video gaming highlights the challenging environment Ubisoft is navigating, especially given its ongoing restructuring efforts.

Analysts believe that Ubisoft’s current operational state—characterized by a large workforce and uncertainty surrounding future game releases—reduces the chances of any alternative buyout offers.

Additionally, there are complexities stemming from Ubisoft’s existing agreement regarding cloud gaming rights for Activision Blizzard, which could create contractual hurdles in the event of a change in ownership.

Consequently, the likelihood of a takeover by any new buyer appears increasingly remote.

Despite the buyout speculation, analysts urge caution. They highlight the risks related to Ubisoft’s upcoming game launches, particularly in light of recent profit warnings that have heightened concerns regarding the company’s financial performance. The previously reassuring schedule for major title releases is now met with skepticism due to increased execution risks compared to prior launches.

In response to these factors, analysts have adjusted Ubisoft’s target price from €10.80 to €15.40, reflecting the removal of a valuation discount in anticipation of a potential buyout. This adjustment indicates an upside of 8.5%, though a “hold” rating on the stock has been maintained due to persistent concerns about potential earnings declines.

While speculation about a buyout involving the Guillemot family and Tencent generates interest, it is crucial for analysts to consider the structural challenges facing Ubisoft. The company boasts a strong portfolio of intellectual property, including popular franchises such as Assassin’s Creed and Tom Clancy.