CD Projekt reported solid fourth-quarter results, demonstrating the power of the group's owned IPs and their transferability across entertainment media, analysts at Jefferies said as they confirmed their ‘Buy’ rating and 156 zloty price target for the company.
The Polish game developer currently trades at around 114 zloty.
“CD Projekt just had its second-best quarter in history, despite not releasing any new games,” the analysts said in a client note. “We believe the overwhelmingly positive sentiment and momentum for the Cyberpunk IP will continue into 2023, and we continue to see consensus estimates as too conservative,” they added.
Revenue for the three months to December 31, 2022, came in more than 12% ahead of Visible Alpha consensus, while earnings before interest and tax (EBIT) was more than 23% ahead of consensus, the analysts said, noting that the Cyberpunk: Edgerunners show on Netflix, which aired on September 13, greatly increased demand for the base game during the quarter.
The Witcher 3 next-gen upgrade, made little contribution to the quarter due to the late release on December 14 but is expected to make a bigger contribution to 1Q 2023 results.
“The greatest benefit of now having both Cyberpunk 2077 and Witcher 3 updated to next-gen graphics is that both franchises' lifetime values have been greatly increased,” the analysts said.
On the upcoming Cyberpunk 2077: Phantom Liberty launch, the analysts said they expect it to attract incremental demand for the Cyberpunk 2077 base game.
“It's very rare to have a game that sells better in year three of launch than in year two without any paid DLCs (downloadable content),” they added. “We believe the overwhelmingly positive sentiment and momentum will make Phantom Liberty a success, which will continue to attract incremental demand for the base game. We understand that the marketing campaign for Phantom Liberty starts in June 2023.”
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