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On Thursday, Deutsche Bank (ETR:DBKGn)’s analyst George Brown revised the price target for Ubisoft Entertainment SA (LON:0NVL) (UBI:FP) (OTC:UBSFY), reducing it to EUR10.50 from the previous EUR12.00, while keeping a Hold rating on the shares. The adjustment comes as Ubisoft (EPA:UBIP) presented a weaker than expected outlook for the fiscal year 2026, ending in March, which includes projections of flat year-over-year net bookings, in contrast to the consensus expectation of a 13% increase.
Ubisoft anticipates adjusted EBIT to break even, deviating from the consensus forecast of a EUR209 million profit, and foresees negative free cash flow (FCF), as opposed to the anticipated EUR154 million positive FCF. The company specifically expects FCF consumption to exceed EUR100 million. Despite this, Ubisoft has experienced some positive developments with Assassin’s Creed Shadows, but its first-quarter outlook for fiscal year 2026 remains subdued, with net bookings projected at EUR310 million, which is 13% below consensus.
The recent EUR1.16 billion cash infusion from Tencent (HK:0700), which acquired a 25% stake in a new Ubisoft subsidiary, has alleviated some balance sheet pressures, potentially making it easier for Ubisoft to decide on game delays. This investment is set to reduce Ubisoft’s consolidated net debt, which currently stands at EUR1 billion, to zero by the end of this year.
Brown’s comments highlight that while the Tencent deal has provided financial breathing room, Ubisoft must still address its lackluster profitability. The analyst suggests that this could involve making changes to the company’s headcount to improve its financial performance.
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