Ubisoft: Unclear Path Forward

2026-05-24 09:45:00 ET

Ubisoft ( UBSFY ) is dealing to some extent with tough comps. AC: Shadows was released towards the end of Q4, on March 20th, and it was a major AC title release that, though underperforming in our view, was still going to be hard to beat in the year after, particularly as the dynamics in video game releases are characterized by heavy sales frontloading, including due to pre-order activity. We note the back catalog performance was pretty good; they have some alright franchises there, like R6, which actually is well regarded. But other than that and perhaps an incoming Black Flag remaster, there won't be anything going on for Ubisoft for a while, and they have capitulated due to debt issues on their most important franchises by selling a considerable stake to Tencent ( TCEHY ). While the valuation of that transaction exceeds the current company EV, the reality is that anyone with a calculator can see that, and there are reasons why the market may not warm up to the company despite this transaction, which was already quite a while ago . For us, it's the lack of clear direction and momentum in the releases and the utilization of franchises, whose popularity we fear will decay. Also, the sale of a stake in just the strongest franchises, as opposed to the whole group, by forming a new entity to contain them isn't particularly good for a minority shareholder in the overall group who now effectively owns more of the weak franchises and less of the strong ones with their shares. While this is not the first time we've seen a reorganization like this in the video game space, we also worry about whether they have the right North Star, citing Metacritic reviews in their disclosure and trying to spin things by lauding the Avatar game, for example, as a critical and perhaps even a commercial success, when it was neither . 80 is also a pretty weak Metacritic score in my books, and review sites don't really set a high or good standard anymore either. In our view as members of the video gaming public, we don't respect it....

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