CD Projekt is valued higher than the global gaming industry, a situation very unusual for the Warsaw Stock Exchange (GPW). Investors are already waiting for the new Witcher game, every pre-premiere piece of information causing significant fluctuations in the stock price.
CD Projekt’s stock price came under significant pressure, losing 7.4% in one day despite publishing the Q3 2023 results which proved to be slightly above the market consensus. The company posted a net profit of PLN 78.1 million, with revenues hitting PLN 227.6 million.
The company shared several important operational details: sales of “Cyberpunk 2077” exceeded 30 million copies, and the “Ghost of Freedom” expansion sold 8 million units. Moreover, the company’s flagship project “Polaris” entered production with a team of 400 developers, which analysts say increases the chances for the game’s premiere in 2026. The company also announced plans for another Cyberpunk animation for Netflix, although no detailed schedule for this project has been revealed yet.
“When it comes to CD Projekt’s results, one cannot approach them like other businesses, comparing their quarterly earnings year-on-year,” says Tymoteusz Turski, a stock market analyst at XTB, in an interview with MarketNews24. “The gaming industry has its particularities, and furthermore, within this industry, CD Projekt is distinguished by the release of major titles, which is rarely possible. Other gaming companies on the Warsaw Stock Exchange mainly focus on mobile games and simulators, meaning relatively low-budget projects.”
CD Projekt’s results, therefore, depend on when their major releases hit the market. In the third quarter of 2023, the Cyberpunk expansion, Cyberpunk 2077: Ghost of Freedom, was launched. Hence, the recent quarterly results seem dull, but only because they are compared to the inflated results from the previous year.
Year-on-year revenues fell by almost 50%, with operating profit down by 57%. If treated as a typical business, the results would be alarming, implying the company is not performing as it should. In reality, the results for 3Q2024 are at least solid, with the next quarter set to be stronger due to the Christmas shopping period.
“The market’s nervous reaction despite robust results should not come as a surprise,” comments the XTB expert. “The company often saw a correction during sessions following the results of quarters without a premiere, especially when the stock price rose before a conference, which we also saw this time. We experienced a similar situation when we saw the Q1 2024 results; there was a major sell-off of shares.”
In the short term, such a correction in the stock price is typical. In the medium term, upward pressure can be expected due to the increasing amount of information about the Polaris project, the latest game from the Witcher universe, which has entered production. This information has been eagerly awaited since the beginning of the year.
The official premiere date is not yet known; CD Projekt is being cautious not to repeat the mistake made with the release of Cyberpunk 2077. With the marketing campaign launched too early, the company came under immense pressure as the product was unfinished, which was poorly perceived by both players and the market.
“Long-term investor focus will now be on reports related to the new Witcher,” summarizes T Turski from XTB. “However, it’s hard to assess how long we will have to wait for the premiere; it might be 2026 or perhaps 2027.”
It’s worth noting that CD Projekt is valued higher than the global gaming industry, a very unusual situation as companies listed on the GPW usually have undervalued valuations.
Source: https://managerplus.pl/cd-projekt-pod-presja-rynek-nerwowo-reaguje-na-wyniki-inwestorzy-czekaja-na-wiedzmina-28126
