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Ubisoft Entertainment SA (UBI: FP) (OTC: UBSFY (OTC:UBSFY)) has experienced a downgrade in stock rating by Deutsche Bank from "Buy" to "Hold."
The adjustment comes with a significant reduction in the price target to €15.00 from the previous €24.00. The company has adjusted its net bookings target for the fiscal year ending in March 2025 to €1.95 billion, which is a 16% year-over-year decline, contrasting with earlier expectations of solid growth.
Ubisoft's profitability forecast has also been revised, with non-IFRS earnings before interest and taxes (EBIT) now anticipated to break even, a stark shift from the prior estimate of just above €400 million. Free cash flow (FCF) projections have been altered to zero, deviating from the previously expected positive FCF.
The downgrade was larger than anticipated and follows weaker than expected sales for the video game "Star Wars Outlaws." Additionally, a three-month delay to the release of "Assassin's Creed Shadows," now scheduled for February 15, has contributed to the revised estimates, as it moves a substantial amount of revenue into the fiscal year 2026.
Although a revision was largely expected by the market—evidenced by a 30% decline in share value since the launch of "Outlaws"—the delay of "Assassin's Creed Shadows" adds to the disappointment.
Ubisoft has stated that while "Assassin's Creed Shadows" is feature complete, a short delay was necessary to polish the game further. This decision was influenced by lessons learned from the release of "Outlaws."
The delay, coupled with a less favorable release slot and potential risks of further delays to address backlash, has led to lowered sales projections for "Assassin's Creed Shadows." The estimated sales units for the game have been adjusted from 8 million to 7 million over a 12-month period post-release.
In other recent news, Ubisoft Entertainment SA has experienced a series of adjustments from various analyst firms due to recent developments within the company. BMO Capital Markets has downgraded Ubisoft's price target from €22.00 to €20.00, while maintaining an Outperform rating.
The adjustment comes after Ubisoft's announcement of lowered financial guidance for the second fiscal quarter and fiscal year 2025, influenced by the initial performance of "Star Wars Outlaws" and the delay of "Assassin's Creed Shadows" release.
TD Cowen, while maintaining a Hold rating on Ubisoft, has also reduced its shares target from EUR27.00 to EUR23.00, following the postponement of two significant mobile game releases to fiscal year 2026. Exane BNP Paribas (OTC:BNPQY) has downgraded Ubisoft's stock from "Outperform" to "Neutral," setting a new price target at €14.50 due to underperforming AAA titles and free-to-play games.
InvestingPro Insights
In light of Ubisoft Entertainment SA's recent downgrade and forecast adjustments, real-time data from InvestingPro provides additional context. With a market capitalization of $1.38 billion and a notably low price-to-earnings (P/E) ratio of 7.4, the company appears to be valued conservatively relative to its earnings. The adjusted P/E ratio for the last twelve months as of Q4 2024 stands at 9.14, suggesting a slight increase in valuation. Despite the setbacks, Ubisoft's gross profit margins remain impressive at 91.13%, indicating strong underlying profitability in its operations.
InvestingPro Tips highlight that the stock is currently trading near its 52-week low and is considered to be in oversold territory according to the Relative Strength Index (RSI), which may interest contrarian investors or those looking for potential turnaround situations. Furthermore, the valuation implies a strong free cash flow yield, which could be attractive to value investors. For those seeking a deeper dive into Ubisoft's financial health and future prospects, InvestingPro offers a comprehensive list of additional tips, currently featuring 14 insights that can be found at https://www.investing.com/pro/UBSFY.
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