Shares in CD Projekt Red continued to new highs after it was announced that GWENT: The Witcher Card Game soundtrack has been made available on Spotify, Apple Music, Google Play Music. We can only assume the full launch of GWENT is just around the corner.
You can find it here. For some insane reason, all text is saves as images in the PDF so it's not searchable.
As expected, without only DLC's out, revenue as profits were down YoY.
As Witcher 3 was released in 2015 a more interesting comparison is against 2014. In 2014 the company had total sales of PLN 110m for the first 9 months - compare that to PLN 100m for only the latest quarter and PLN 419m for the first 9 months - that is a 4x growth.
Cheap
I think the stock is a great buy. The company had PLN 800m in sales in 2015, their record year thanks to Witcher 3 being released. That puts it at about 4.7 price/sales which is getting close to EA and ATVI. But P/E 2015 is 11 and P/E 2016 annualized is 16.6 - so still very cheap given the momentum for Gwent and potential for Cyperpunk 2077.
If they release Cyperpunk 2077 next year they can easily have revenues of above PLN 1bn for 2017 and that would probably put it around PE 7 with current profit margins.
GOG
During the first 9 months of 2016 GOG revenue was 27% of total revenue. GOG profit margin is 6% compared to 52% for the core operations.
GOG revenue was slightly up YoY, but given that No Man's Sky was their big release of 2016, the potential of GOG still remains to be seen.
GWENT
The company is very positive about Gwent. They have signed a partnership deal with GAEA, on of the fastest-growing Chinese Interactive entertainment providers, with the goal of publishing GWENT in China.
I picked up the latest issue of PC Gamer magazine and was happy to read about Gwent and an editorial praising CD Projekt Red. I have never been a fan of card games but I am well aware of its appeal. The last time I played something similar was the Star Wars Battlefront Base Commander, which was more fun than the actual game.
I love it when a gaming company shows this kind of free thinking and I am very happy to maintain a long position in the company and totally agree with the comments in the PC Gamer editorial:
““It’s unusual and interesting that a card game has become a vessel for new stories set in a universe that people love (The Witcher) - but I’ll never underestimate CD Projekt Red’s ability to surprise and delight players.””