Ubisoft Plunges After Two Recent Games Fail to Deliver

(Bloomberg) -- Ubisoft Entertainment SA plunged the most in six years after the poor performance of two recently released video games forced the company to slash its full-year targets.

The stock fell as much as 29% in Paris after Ubisoft cut its forecast for full-year net bookings to about 1.45 billion euros ($1.61 billion) from previous guidance of 2.19 billion euros. The company also slashed projected operating income to between 20 million and 50 million euros, from a previous target of 480 million euros.

Ubisoft blamed a “sharp downward revision” in the expected revenue from Ghost Recon Breakpoint and “to a lesser extent” from Tom Clancy’s The Division 2.

“We didn’t fully deliver on both games,” Chief Executive Officer Yves Guillemot said on a call with analysts late Thursday. Chief Financial Officer Frederick Duguet, meanwhile, acknowledged that the company needs to “elevate” the quality of its games.

To achieve this and allow for longer development times, Ubisoft will now postpone the release of three games -- Gods & Monsters, Rainbow Six Quarantine and Watch Dogs -- to next year, which will hurt this year’s financial performance.

Ghost Recon Breakpoint was released on Oct. 4, while The Division 2 debuted March 15. While both games “underperformed commercially,” Ghost Recon Breakpoint also disappointed “critically,” Guillemot said.

Shares of Ubisoft were 22% lower to 43.80 euros by 9:57 a.m. in Paris, bringing the decline this year to 38%. The company’s five-year notes maturing in 2023 fell 0.9 cents to 100.9 cents, their biggest drop on record.

Thursday’s surprise announcement shows how reliant video-game makers are on blockbuster games -- and how much they suffer if the appetite for their games wanes.

Restoring Confidence

“It will clearly take some time for confidence to return,” said Robert Berg, an analyst at Berenberg. “Although it must have been a very tough decision, we believe management is doing exactly the right thing by delaying these games.”

“Investors will be frustrated with recent developments, and rightly so,” said Neil Campling, an analyst at Mirabaud Securities. “But by ensuring that the future releases are given a closer focus on quality -- and then timed for the following fiscal year, when the additional catalyst of the next generation of consoles will be with us, then this misstep now could turn into a well-timed opportunity ahead.”

The company also said it will postpone the release of its blockbuster Skull & Bones game to 2022. The poor performance of Ghost Recon will cause “meaningful” impairment charges, Duguet warned.

Ubisoft’s second-quarter earnings are still planned for Oct. 30.

--With assistance from Kit Rees and Tasos Vossos.

To contact the reporter on this story: Angelina Rascouet in Paris at arascouet1@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Nick Turner, Frank Connelly

©2019 Bloomberg L.P.