Ubisoft Shares Dip Amid Ownership Speculation

Shares of Ubisoft (EPA:UBIP) fell on Monday after a strategic update highlighted the company’s ongoing challenges and potential ownership shifts.
At 5:55 am (0955 GMT), Ubisoft was trading 2.4% lower at €13.86.

According to analysts at HSBC, reports suggest that the Guillemot family, along with Tencent, is considering taking the gaming giant private. While this buyout speculation could provide stability, it raises questions about broader interest in Ubisoft amid operational hurdles.

The gaming sector has seen a decline in potential buyers, with interest from console makers and tech firms waning since the pandemic’s peak. This lack of enthusiasm underscores the tough landscape Ubisoft faces, compounded by ongoing restructuring and execution challenges.

Analysts note that Ubisoft’s operations, characterized by a bloated workforce and uncertainty around future game releases, reduce the likelihood of an alternative buyout offer. Complications may arise from Ubisoft’s agreement with Microsoft regarding cloud gaming rights for Activision Blizzard, which could create contractual barriers if ownership changes.

As a result, the prospect of a takeover by any new entity appears less likely. Despite speculation of a potential buyout, analysts remain cautious, highlighting execution risks for upcoming game releases following recent profit warnings that have increased concerns about the company’s profitability.
The anticipated release schedule for major titles, once thought to provide reassurance, is now met with skepticism due to heightened execution risks compared to past launches.

In light of these factors, HSBC has revised its target price for Ubisoft from €10.80 to €15.40, reflecting the removal of a valuation discount in anticipation of a potential buyout. This adjustment suggests an 8.5% upside, but analysts have maintained a “hold” rating on the stock, citing ongoing earnings downside risk.

While the potential buyout from the Guillemot family and Tencent is generating interest, analysts emphasize that Ubisoft’s structural challenges cannot be ignored. The company boasts a strong portfolio of intellectual property, including successful franchises like Assassin’s Creed and Tom Clancy.