I think Ubisoft continually flies under the radar on their size and quality. This is a huge company featuring over thirteen thousand employees across multiple studios worldwide. With that many employees and studios you are able to diversify into multiple genres and avenues. How does this affect our view of the company ?

Lead Instead of Following

One of the main reasons I believe that Ubisoft has continually found success over time is because they are always interested in going where the technology goes. If you look back at almost every new console launch, Ubisoft is there with games. An example that comes to mind is the Nintendo Switch and how it didn’t get much third party support out of the gate. Most companies decided to take a wait and see approach with the Nintendo Switch based on the flop that was the WiiU. An unfortunate system with a great library of games that had a bad name and limited tech. Even on the WiiU Ubisoft embraced the technology of the second screen and created ZombiU. A game that was a little undercooked but had some great ideas including the inventory system being on the tablet forcing you to make a tense decision to look in your back pack exposing yourself to danger. Few other games on the WiiU did anything similar. Most developers just used it as a second screen to play if you couldn’t use your tv.

Ubisoft continued to have faith in Nintendo, even after the WiiU and was able to create Mario + Rabbibs: Kingdown Battle. Outside of first party games, the first year of the Switch was a little lacking and having a game like Kingdom Battle helped fill some holes. Announced at one of their recent earnings reports, Kingdom Battle has sold over 2 million copies, which does put it into great company with a limited amount of other games on that system that have sold over 1 million with most of the bestsellers being first part games.

Ubisoftia

In the continuing trend of the ability to embrace the latest technology brings us to Google Stadia. There is still a lot we don’t know about the future of the streaming service but there was a reason the Assassins Creed: Odyssey was chosen for Project Stream. Its a AAA title that pushes graphical limits from a studio who is always willing to embrace new technology. At the keynote reveal event for Stadia, Google announced a strong partnership with Ubisoft for the launch later in the year. The limits and reach of Stadia is unknown as well as the pricing structure but having your games available on a system with untapped potential is a good idea for business. One of the main long term opportunities Ubisoft mentioned in their last earnings call was new forms of gaming (streaming). Even if Stadia doesn’t catch on and becomes a flop, there will still be plenty of money to be earned before it crashes and the world is only heading in the direction of all digital and all streaming, which means that Ubisoft will have learned a lot in the process.

Digital World

The last earnings report highlighted a bunch of key areas that we saw. The world is moving to a more digital world every day and they reported an increase in digital distribution of 52 percent year on year. The recurring investment from players purchasing in game dlc, skins, etc also seems to have risen in line with the same percentage of digital distribution as that is also up 50 percent year on year and has seem similar increases in line with digital distribution. Digital distribution is up over 410 percent from the same period in the first half of 2016. This is a major bright spot because the more people buy the games digitally the less money needs to be paid to retailers which in the end provides higher nets.

There was also a little scare that Vivendi was going to attempt a hostile takeover of the company, but the long and short of it is that Ubisoft avoided the takeover, but in the process now have access to a huge Chinese market thanks to Tencent. Ubisoft notes that expansion to Asia combined with increased digital are current strengths.

Forecasting

Their high hopes for the FY19 was put onto the sales of Assassins Creed: Odyssey, The Crew 2 and Tom Clancy’s The Division 2. The target for these three games combined was 20 million units by the end of fiscal year which is March 31, 2019. It will be interesting to see if they can attain this goal by end of March. NPD had AC as the 10th best selling game last year. The closest data that we can find from that is from the game right beside it on the chart, Monster Hunter World. On the Capcom website for the period ending Monster Hunter world has sold 11.9 million copies. So you have to assume AC will be around that mark come end of March. Lets assume that AC has sold 12 million by the end of March. That leaves the other two games to make up the 8 million. According to a earnings report in 2016, The Crew has 10 million unique registered users. Ubisoft hasn’t come out to announce any of the sales figures for The Crew 2 but they have said that it is in line with the first entry in the series. The other question is how The Division 2 sales are in the first month. The first entry in the series did well over time due to good word of mouth about the support the developers were giving the game. It has been almost three years since The Division and since then the install base on consoles has continued to grow. I would guess that the combined sales of those two games could make up the 8 million difference.

Future

The final reason I think that Ubisoft has growth potential is due to all of the studios they have to be able to create new entries in their existing IP, create new IP and even bring back some long dormant franchises. They are clearly treating most of their current active franchises with the love they deserve but how about dormant ones? We could easily use new entries in Prince of Persia, Splinter Cell, Rayman and Watch Dogs to name a few plus we know that beyond good and evil is currently in development. This also goes without saying that we are on the cusp on the next generation and Ubisoft is always at the front of the line with launch games, which sell well because people need to buy something to go with their new system.

Just 5 years ago this stock was barely valued over 10 dollars and just last summer it was trading for over 100 dollars. The whole gaming industry took a hit but with the gaming world getting bigger all the time you have to trust the gaming companies that go where the opportunity is.