11 Bit Studios

Were my predictions wrong? - Q3 Report $11B (+0.72%)

As the only analyst reporting on 11 Bit here on the platform, I am pleased to be able to present the company's quarterly figures to you.

As I had already assumed, 11 Bit reported record sales and record profits for the first 9 months of 2024. At PLN 106.6 million, sales were even higher than in the best year in the company's history.

The sales partnership with Microsoft $MSFT (+0.08%) generated around half of the revenue.

In Q3, a total of around PLN 76 million was generated, which is around seven times the figure for the same quarter of the previous year. 11B was highly profitable and achieved a net profit of PLN 47.5 million, which corresponds to a net profit margin of 63%.

As already mentioned in previous analyses, this is due to a one-off effect - namely the release of its blockbuster Frostpunk 2, which contributed around 75% to total sales. This game sold around 441,000 copies in September, falling short of market participants' expectations. The games were mainly sold to China, the USA and Germany.

After 2 months, we are now at 511,000 units of the game sold. This could be roughly on a par with the original Frostpunk, which was released in spring 2018 and sold around 1.4 million units within a year. This means that Frostpunk would now have to sell around 90,000 units every month to reach this target as well. It will be exciting to see how Christmas sales and the console release will affect sales.

It is also worth noting that around half of customers were persuaded to buy the Deluxe Edition of the game, which is around twice as expensive, which is an indication of strong customer confidence and loyalty. This is particularly relevant for future sales in the franchise and for the release of the new IP "The Alters" in spring 2025

All in all, I am very surprised by the lack of a positive reaction from the market. As already mentioned, the company has just closed the best quarter in its history and at the same time the lowest share price in the company's history. Something does not add up here. I am therefore reiterating my price target of €93

As already announced in one of my last posts, here is the follow-up purchase of $11B (+0.72%)

We have now reached a relatively good bottom. Should we fall again towards €55, I would consider buying more. In addition to my own analysis (see my profile), the decisive factor for the purchase at this point in time was that 2 insiders have now struck in the sell-off. The two supervisory board members Piotr Wierzbicki and Marcin Kuciapski have generously dipped into their own pockets. Marcin in particular has been buying steadily over the last few years and has now made his biggest purchase to date.

However, I assume that the recovery could continue until the middle of next year. Then I will have to judge whether my assessments were correct.

Further additional purchases in the current market environment include:

$MSFT (+0.08%)

$EW (+1.88%)

$OKTA (+3.79%)

$JEN (+0%)

$V (+1.31%)

$VRTX (+0.47%)

$11B (+0.72%) a promising bet for courageous investors

Polish video game developer 11 Bit Studios on Friday announced its latest game Frostpoint 2 on Friday and subsequently fell by more than 50% to the lowest level in the company's history - i.e. lower than at IPO 4 years ago.

Now you might think that this was because the game had a bad start. But why is that? Well, not really. Although the press praised the game to the skies, the release weekend was more of a disappointment for analysts. Only slightly less than half of the sales analysts had hoped for were achieved and player ratings were only 71% positive instead of over 80%.

Why is that? If you take a closer look at the ratings, there are actually no fundamental problems with the game. Technically, the game works flawlessly and the design is also well done. However, players criticize that the game takes a different artistic approach to the first part and that they would have liked "the same as always". Nevertheless, the critics also emphasize the fundamentally high production quality.

Developer 11 Bit has also already announced that the game has already sold 350,000 copies and has therefore recouped all production and marketing costs. This means that the game is already making a profit. How high this profit will be is now the crucial question.

I am of the opinion that the expected profits of 11 Bit Studios are currently underestimated. On the one hand, the analyses do not take into account the fact that Frostpunk will not only make a profit through copies sold, but that the game is also included as a day one release in the Gamepass from $MSFT (+0.08%) is included. Many players (including me) will of course take the opportunity to "borrow" Frostpunk and play it through instead of buying it at full price. These license revenues - which could be considerable for a Day One release - are probably not yet properly priced in at the moment.

In my opinion, there are also other major sales drivers to come. The Christmas and winter period will provide another decisive tailwind. We can also expect the release for consoles in 2025. A mobile spin-off of the original Frostpunk will also be released next month. However, no risks are being taken here and the development is being outsourced to a South Korean company, which means that if it fails, virtually nothing will happen and if the classic game is a surprise hit with over 5 million units sold, further license fees will rain down on the Polish capital Warsaw.

I find the entry at 11 Bit very interesting at the moment, but I will wait until next week when the bottom forms. After that I see a price potential of 40-70%.

(No investment advice. Investments in everything except stones carry the risk of a total loss)

DO NOT IMITATE, I AM DELIBERATELY TAKING A CALCULATED RISK!!!

It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a mispriced bet - that they can occasionally find one. And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time they don't. It's just that simple.

Charlie Munger

Since I $TSLA (+0.05%) is massively undervalued and $11B (+0.72%) an asymmetric bet with massive upside potential (especially with the release of Fostpunk 2), I have decided to bring forward my savings rate and take out a loan of 15k. I am convinced that I can outperform the interest rate of 7.3% over the 5 years. Thanks to an overdraft facility, I was able to increase the amount to be invested to €18500 (I will close the overdraft facility with the next 3-4 months' salary).

My savings rate is higher than the loan repayment rate anyway and as I will have finished my doctorate in 2.5 years and will then make a significant jump in salary, I am prepared to take the risk.

I have divided this sum as follows:

• 7850€ in 11 bit studios
• 7367€ in Tesla
• 3000€ in Tesla KO certificate 2x leveraged
• 250€ in Tesla KO certificate 8x leveraged

So approx. 44% in 11 bit and 56% in Tesla

(of which 70% in shares and 30% with higher exposure)

Besides, my savings plan runs in addition to the loan installment to build up a core with:

25% MSCI World

25% MSCI EM IMI

25% MSCI European Small Cap

25% Pershing Square

I know I'm getting a lot of hate again because taking credit for an investment is absolutely NoGo (but for a car that already loses 10-20% of its value at purchase it's of course okay😄) and others will just dismiss it as gamble, but for those who understand why I'm doing it or just want to see me fall: Feel free to follow me, I will give monthly updates on how good or sh*t my credit portfolio is doing 😄