Video game maker CD Projekt rises after strategy update and share buyback

Oct 5 (Reuters) – Shares of CD Projekt (CDR.WA) pared early gains on Wednesday as investors chewed on the Polish video game maker’s lineup of new games that analysts said could boost growth, but also increase the risk.

The stock jumped 9% at the open after the company announced long-term plans for new games in its two main franchises, The Witcher and Cyberpunk, and a new original game on Tuesday.

He also launched a share buyback of up to 100 million zlotys ($21 million).

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“We view the company’s announced goals as ambitious and their implementation will take it to a new, much higher level,” analysts at brokerage BDM wrote.

They pointed out the risks of moving from CD Projekt’s previous practice of focusing on one big-budget game to developing multiple projects simultaneously.

Credit Suisse analysts estimated in a note that if the new games generated the same revenue over four years as “Witcher 3: Wild Hunt”, its revenue forecast for 2023-2030 would increase from 4.6 billion zlotys to 17 billion. of zlotys.

GAME OF PATIENCE

CD Projekt released the first game in the Witcher medieval fantasy franchise in 2007 and added another with “Cyberpunk 2077” in late 2020.

Its production cycle usually lasts four to five years.

“Announcement of the Witcher saga or new intellectual property gives hope for more future development than expected,” Piotr Cieslak, chief executive of the Polish Association of Retail Investors, told Reuters in a statement. E-mail.

He noted that multiple concurrent projects would likely result in higher costs and shareholders would have to wait to see the impact.

Credit Suisse analysts noted that adding around 400 employees as CD Projekt forms a new studio in North America could increase development costs by 50% as it pays higher US salaries.

“This could result in significant near-term earnings reductions, in our view. The first positive revenue impact may not occur until 2026,” they wrote.

The stock, which has lost around 40% of its value so far this year, pared earlier gains and rose around 2.4% to 110.96 zlotys at 0918 GMT.

($1 = 4.8288 zlotys)

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Reporting by Anna Pruchnicka, Additional reporting by Karol Badohal, Editing by Barbara Lewis and Mark Potter

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