CD Projekt tumbles on new games but analysts warn of risks

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CD Projekt tumbles on new games but analysts warn of risks

Shares in CD Projekt trimmed early gains on Wednesday as investors chewed over the Polish video game maker's line-up of new games that analysts said could boost growth but also increase risks.

The stock went up 9 per cent at the open after the company announced long-term plans for new games in its two core franchises, the Witcher and Cyberpunk, and a new original game.

It has launched a share buyback for up to 100 million zlotys $21 million. BDM brokerage analysts said that the company's goals are ambitious and that their implementation will allow it to reach a new, much higher level.

They pointed out the risks associated with shifting from CD Projekt's previous practice of focusing on one big-ticket game to developing multiple projects simultaneously.

Credit Suisse analysts estimated that if the new games generated the same revenue over four years as the Witcher 3: Wild Hunt had, its revenue forecasts for 2023 -- 2030 would increase by 4.6 billion zlotys to 17 billion zlotys.

CD Projekt released the first game in the Witcher medieval fantasy franchise in 2007 and added another in late 2020 with Cyberpunk 2077.

Its production cycle usually takes four to five years.

Piotr Cieslak, managing director of Poland's Retail Investors' Association, said in an email that the Witcher saga or a new IP gives hope for a more expansive development in the future than previously expected.

He noted that multiple simultaneous projects would likely come with higher costs and shareholders would need to wait to see the impact.

Credit Suisse analysts noted that adding about 400 staff, as CD Projekt forms a new studio in North America, could increase development costs by 50 per cent as it pays higher U.S. salaries.

We believe that this could lead to some sizeable near-term profit reductions. The first positive impact on revenue could not be seen until 2026, they wrote.

The stock, which has lost around 40 per cent of its value this year, trimmed earlier gains and was up around 2.4 per cent at 110.96 zlotys as of 0918 GMT.