The Polish stock market had a poor end to May, with gaming companies, particularly CD Projekt, standing out negatively. CD Projekt failed to impress investors, who are now speculating on the release date of the game Polaris.
The beginning of May was at least good for CD Projekt, with its stock price rising rapidly. This made investors eagerly anticipate the latest quarterly results. Although CD Projekt’s results exceeded expectations and the company showed solid growth dynamics in key financial metrics, its stock price fell by nearly 7%.
“It has become a tradition that when CD Projekt releases results that are better than expected, the stock price plunges after the announcement,” said Tymoteusz Turski, an equity market analyst at XTB, in an interview with MarketNews24. “In May, however, the stock price rose by over 20% before the results were announced, despite the company not providing any new information to justify such an increase.”
This situation is rooted in the nature of CD Projekt’s business model, which revolves around releasing a major AAA title every few years. With such a business model, the most crucial aspect for investors is assessing the potential of the latest title, which for CD Projekt is the Polaris project, a new game set in the Witcher universe. It is currently in the pre-production phase, and according to preliminary estimates based on limited information from the company, the production phase is expected to start in the second half of 2024.
Assuming the process is somewhat shorter than that of Cyberpunk 2077, the game’s release can be expected around 2026-27 at the earliest. Given this distant release date, any significant short-term increases in the company’s stock price are likely speculative, as they would be hard to justify without a strong catalyst.
Other projects from the company also remain in very early stages, making it unlikely that they will play a key role in the company’s financial results. Consequently, the recent gains of around 20% in May were largely reduced after the quarterly results were published.
“The stock price drop was not caused by disappointing data or worse forecasts, but rather by profit-taking by investors who built up the stock price in May,” commented the XTB expert.
Thus, in the near future, any information revealing details about the Polaris project could form a positive basis for stock price increases, raising the hopes of both gamers and investors. According to the company, the first trailers could appear before the official marketing campaign begins.
CD Projekt also sees an opportunity to expand its brand beyond the gaming world. With the end of the Hollywood strikes, the chances of a new film project set in the Cyberpunk universe have increased, which could help boost global brand awareness. However, like the Polaris project, this is still a matter of the distant future.
Is there a chance that CD Projekt’s stock price will return to the record levels of August 2020 or even to the recent 52-week highs of over 175 PLN per share in the next several months?
“In the next several months, it is rather unlikely that CD Projekt will return to the high valuations seen before the release of Cyberpunk, primarily because the most important release, Polaris from the Witcher universe, remains in the pre-production phase,” assesses T. Turski, an analyst at XTB. “Investors will now be trying to estimate the release date.”
