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ThemenmitKopf
@topicswithhead
3Mon·

🐺 CD Projekt: Of sorcerers and cyberpunks - the masters of digital worlds 🏙️


CD Projekt, a company based in Poland, specializes in the development and publication of video games. Founded in 1988, the company began as an IT service provider and has since developed into one of the most renowned names in the global gaming industry.


Historical development


$CDR (+0.89%) The company's origins lie in Optimus S.A., which began as an IT service provider. A decisive milestone in the company's history was the acquisition of game developer CD Projekt RED Sp. z o.o. in 2009, which marked the company's entry into game development and laid the foundation for its current success. In 2012, the company was finally renamed CD Projekt S.A., underlining the transition to a pure game developer.


Business model and core competencies


CD Projekt specializes in the development of story-driven role-playing games and has thus achieved an outstanding position in the industry. The company is particularly known for its ability to create deep, immersive game worlds that are popular with players worldwide. Its best-known productions include the award-winning "The Witcher" series, which has established itself internationally as one of the most successful role-playing games.


In addition to game development, CD Projekt also operates the digital distribution platform GOG.com, which provides an additional source of income and further diversifies the business model.


Future prospects and strategic initiatives


The future of CD Projekt rests on two central pillars: the further development of existing franchises and the creation of new intellectual property rights (IPs). The company is investing heavily in its technology and development processes to make future releases smoother and to further increase the quality of its games.


Another important strategic focus is the expansion of the business into other media. An outstanding example of this is the successful Netflix adaptation of "The Witcher", which has not only significantly increased brand awareness but also opened up new sources of revenue.


Market position and competition


CD Projekt is in direct competition with major game developers such as $TTWO (+0.52%) , $UBI (-1.09%)
$EA (+0.65%) . Nevertheless, the company manages to stand out from the competition thanks to its special focus on high-quality, story-based single-player experiences. This specialization has earned the company a loyal fan base and contributes significantly to its strong market position.


Total Addressable Market (TAM)


The global market for video games is growing continuously and offers CD Projekt enormous potential. With the increasing proliferation of gaming platforms and the growing demand for high-quality and immersive gaming experiences, CD Projekt has excellent opportunities to capitalize on this growing market.


Share performance

TR 14k % since IPO and -2.3% over the last three years.


Development

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CD Projekt is currently one of the smaller game publishers in terms of sales. However, this does not mean that it has to stay that way - the potential for future growth is certainly there.

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CD Projekt is also currently at the lower end of the growth scale, which is mainly due to the fact that the last major game release was some time ago. However, new titles are already in development. Compared to other game publishers, CD Projekt also has a significantly smaller number of IPs, which has given them less flexibility to date.

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In terms of gross margin, CD Projekt is neither at the top nor at the bottom of the rankings. However, the margin, which has fallen recently, should rise again slightly following the release of the new projects. This puts the company in line with the industry average.

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In contrast, CD Projekt clearly stands out in terms of its net profit margin. Even after a decline, the company is still twice as good as many of its competitors and thus clearly holds its own at the top.

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In terms of earnings per share (EPS), CD Projekt is remarkably consistent in positive territory, while many other manufacturers often slip into negative territory in this respect.

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CD Projekt's free cash flow (FCF) has also been positive for some time now, which illustrates the company's forward-looking planning and intelligent management. Despite the continuous investment in the development of new projects, the cash flow remains stable, which speaks for the financial health of the studio.

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Another advantage for CD Projekt's shareholders is the almost non-existent stock-based compensation (SBC)

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In contrast to many other companies that use buybacks to compensate for dilution effects and bring money to shareholders, CD Projekt can largely do without such measures

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The ratio of net debt to EBITDA is also slightly negative at CD Projekt

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However, CD Projekt is the most expensive gaming company in terms of EV/EBITDA ratio, reflecting investors' high expectations for future growth and the success of new projects.


Part 2: https://getqu.in/UAF5xR/

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16 Comments
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Tenbagger2024@Tenbagger2024
3Mon
Nice how you always compare a company with the competitions.
😘
Thank you!
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ThemenmitKopf@topicswithhead
3Mon
@Tenbagger2024 but it's fun to get to grips with the shares yourself. Maybe at some point the data collectors will become so good that you can really go into the analyses in depth and do better segment analyses or co
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Tenbagger2024@Tenbagger2024
3Mon
@topicswithhead
In view of Christmas, the packaging industry would be nice.
$PKG
$AVY
$UFPT

etc.
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Soprano@Soprano
3Mon
Super nice analysis, thank you very much! However, I don't think the companies are ideal in comparison. Ubisoft and EA are poorly managed and have been on the decline for years. Embracer is also just a rummage table for games companies. They bought everything for years and then had to close down and devalue their shares because they were completely over-indebted.

If anything, CDPR can only really be compared with manufacturers who have at least made it their mission to produce good games. Otherwise, strictly speaking, it's not even the same business model. The only peer group that comes into question for me is $CDR $PDX $TTWO $11B.

Something like Cyberpunk - where resources are invested in the project for years to make it a financial and artistic success afterwards - would never happen at EA or Ubisoft. They just churn out the games and hope that they've produced them cheaply enough that they're not in the red.
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ThemenmitKopf@topicswithhead
3Mon
@Soprano You may be right, but in the end everyone is fighting for the consumer's attention in the gaming sector and Ubisoft and EA also have story games, even if it feels like they are never finished. The quality is lacking, but anyone who plays Star Wars or FIFA or Assassin's Creed can hardly end up playing or watching Witcher or Cyberpunk. And even compared to the others, CD is doing very well. Take two has great IPs with Rockstar (GTA and co) and 2k but in the end they are always negative and dilute the shareholder, so it doesn't matter how good the game is if you only get minimal returns in the end. Also the risk ratio is not right. GTA swallows CF for years, has historically released a lot but never phenomenally much and in the end you have the risk that the game might not be the banger after 10 years as everyone hoped. It can end up like Cyberpunk, where you've waited so long, you're just disappointed and then have to put in so much human capital to please the consumer.
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Soprano@Soprano
3Mon
@topicswithhead Well, I'm not convinced by the first argument. You would actually have to compare the entire entertainment sector with each other - anyone who is watching a Disney movie or Netflix or is in a casino or strip club (there are also shares there) - can't play Witcher either. But you have to be realistic enough to realize that most gamers will prefer a new Witcher or a GTA to any Ubisoft copy and paste game.

I don't think Take Two is as bad as you make it out to be. At least in the 2010s, the stock achieved phenomenal returns. It's only gone sideways since 2018. And I don't know if you're aware of it, but they also took over Zynga and became one of the big players on the mobile market. That has been incredibly expensive so far and is the reason why the figures look so bad. But if it is still profitable, that is of course something that would put them ahead of all other major western video game manufacturers.
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ThemenmitKopf@topicswithhead
3Mon
@Soprano In principle, you also have to compare the entertainment sector, but I'm referring to gaming here. That doesn't change the fact that you also earn money with the side stuff.
I only see it as relevant to compare the last 5 years, because everything before that is historically important but irrelevant in terms of business and valuation.
It's of little use to me today that you earned very well in GTA 5 times and so on. That only gives me a direction for GTA 6 with a similar product, but no more. In the last few years, nothing has been going well and the mobile division is already making good money, but it's still doing rather poorly. You also act as if 2k didn't have Fifa like games with NBA 2k and 2k WWE, and the games outside of Rockstar Games were mostly unfinished.
Also, not all gamers prefer good games over bad ones, brand and novelty games are also there. Otherwise you would hardly play any game from Ubisoft, Assassin's creed has always been released unfinished and with a half-thought-through story for the last few years and yet many people still buy it. So you need more than just a good game.
Take Two isn't a bad company either, but it hasn't achieved anything in the last few years, is only just positive and now even negative and has only achieved 20% TR in the last 5 years despite the GTA 5 trailer. You have strong Ips especially through Rockstar and in the end you are still completely dependent on GTA. If the game doesn't perform then it's a real bummer and years of investment are gone. Given that you already have Red dead, LA noire, Mafia, 2KNBA, civilization and Zynga, I somehow don't see the right balance between risk and return. It really depends too much on GTA
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ThemenmitKopf@topicswithhead
3Mon
@topicswithhead You're better off with Microsoft, Sony, Nintendo
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Mister_ultra@Mister_ultra
3Mon
When it comes to gaming stocks, I think it is much more important to look at the products than the financials.

Ubisoft $UBI is currently proving how you can ruin everything despite extremely strong brands (Assassins Creed, Far Cry,...) and drive away any fanbase and goodwill.

Unfortunately, CD Projekt RED can also tell us a thing or two about this. After The Witcher 3, there was no other developer with such a blatantly positive image among gamers as CD Projekt Red. With Cyberpunk, the entire trust was destroyed in one fell swoop and the motto there is now: never pre-order!

EA is probably the most unpopular game developer of all, but with Fifa and co. they have games that bring in annual subscription fees.

All in all, the market is too hot for me from an investment point of view. I'm an enthusiastic gamer (with too little time for it ;) ), but if I'm going to invest in gaming then I'm going to do it via detours such as Microsoft $MSFT or $NVDA - Microsoft has been the best bet since the purchase of Activison anyway, as it's also well established on the mobile market through King. Plus Xbox & PC. But of course no Pure Play

PS: I wanted to buy CD Projekt Red when I held Witcher 3 in my hands for the first time - the shares were still under €5 then. Well, as always: could have, would have,... :D
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ThemenmitKopf@topicswithhead
3Mon
@Mister_ultra You may be right, but unlike Ubisoft and EA, who have been doing this for years and posting poor figures, CD Projekt finished the game in the end and it turned out really well. I even shed a tear at the end. The anime also turned out great, as did the Netflix series, and after the difficult relationship, the community has also forgiven a lot.
Ps. Would never pre-order a game anyway.
Despite the catastrophe, the numbers have always remained stable, with EA and Ubisoft constantly fluctuating back and forth.
Microsoft is definitely the interesting one now but I would put the gaming sector at zero. I don't see that Xbox and co. will really be able to escape from the Microsoft group, the shareholders have always seen Xbox as a block on their leg and just because they now have a super franchise behind them, I don't think it will be any easier against Sony (Playstation). Although I already believe that Xbox is now better than Playstation, many still see it differently.
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user35903002213@user35903002213
3Mon
Kolja hates this trick.
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ThemenmitKopf@topicswithhead
3Mon
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Tenbagger2024@Tenbagger2024
3Mon
@topicswithhead
What trick?
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ThemenmitKopf@topicswithhead
3Mon
@Tenbagger2024 ka the Kolja was already written several times under my text is probably somehow connected with cash burner. The white hate started it, so it must be him somehow
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Tenbagger2024@Tenbagger2024
3Mon
Where has that white rabbit gone?
And why has Burner disappeared?
And then there was Enton after all @Entn
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Oso@Oso
2Mon
@topicswithhead hahaha, not that but kolja. https://www.youtube.com/live/ttjmlTaLCzw?feature=shared
He once annoyed his subscribers for a long time with how great the company is...
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