This photo illustration shows the Ubisoft video game company logo displayed on a smartphone.
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ubisoft Shares plunged 21% on Thursday after the French video game maker cut earnings guidance, canceled three titles and delayed the release of its next Skull and Bones game.
The company’s share price fell to €18.80 per share shortly after the market opened, its lowest level in over seven years. The share then held a slight loss, trading at around €20, down 16% from Wednesday’s close.
In a deal update on Wednesday, Ubisoft lowered its guidance for online bookings in Q3 2022 to €725 million, down from its previous target of €830 million. The company said earlier forecasts had called for him to grow by 10%, but full-year net bookings are likely to fall by 10%.
The company, best known as the publisher of hit franchises such as Assassin’s Creed and Far Cry, cites the poor performance of Mario + Rabbids Sparks of Hope and Just Dance 2023 titles as well as the difficult economic environment.
“There’s a fair amount of ‘hatchdown’ going on globally in relation to the games industry,” Lewis Ward, research director for games at IDC, told CNBC.
“When COVID hit, there was a significant revenue spike of 20-30%.In 2023, we see a potential surge in North America and Europe, in addition to continued accusations of spending spikes caused by COVID. We are addressing concerns about the ongoing recession and ongoing inflation and supply chain challenges, especially with, of course, the ongoing byproduct of Russia’s invasion of Ukraine.”
Consumers are holding back on discretionary purchases in response to rising prices and borrowing costs. Games are especially under pressure. The industry was expected to shrink 4.4% year-on-year to $182 billion, according to his November forecasts from market research firm Ampere Analysis.
Ubisoft is the third game company to issue a disappointing deal update this week. Devolver Digital and Frontier Developments issued earnings warnings on Monday, citing weak trading conditions in December.
“This shows that the macroeconomic environment is having some impact on premium game sales,” Piers Harding-Rolls, director of games research at Ampere Analysis, told CNBC via email.
“But I think it’s more likely that the economic backdrop will affect some companies more than others,” he added. “For example, we’ve already mentioned how the biggest AAA console releases such as FIFA, God of War and CoD sold. [Call of Duty] — So I think it’s too early to assume that all major publishers will be in the same position as these three companies. ”
the gaming industry is watching Increased integrationinclude Microsoft’s Mega Acquisition of Call of Duty Publisher Activision Blizzard and Sony Acquires Destiny Developer BungieAnalysts believe Ubisoft Potential Acquisition TargetThe company’s share price fell more than 38% in 2022, removing €3 billion from its market value.
During September Tencent increased its stake in Chinese tech giant Ubisoft in a deal that made it the largest shareholder in the company. The acquisition gave Tencent an overall 11% stake in his company, including indirect ownership, with the option to increase that stake further up to 17%.
Analysts at the time said the stock purchase dampened takeover hopes. As part of the deal, Tencent can’t sell his stake for five years and increase his direct stake in Ubisoft beyond 9.99% for his eight years.
Ubisoft announced Wednesday that it will depreciate about €500 million of capitalized research and development costs and target fewer titles. He has shelved three of his unannounced game projects and has delayed the release of the upcoming Skull and Bones pirate game from early 2023 to 2024.
The company aims to save around €200 million through a combination of targeted restructuring, the sale of ‘non-core’ assets and staff reductions. The company’s balance sheet has around €1.4 billion in cash and non-cash equivalents.