Stock of the week - CD Projekt (22.09.2022)

3:11 PM September 22, 2022

Many investors, gamers and gaming fans are currently asking themselves what needs to happen for sentiment to return to the gaming industry. The main culprit for the current state of affairs is CD Projekt, so it's no wonder that investors are on the lookout for any positive signs of the appearance of the first spring swallow that will make gaming a green boom. Could one of them be the successful release of the Edgerunners series on Netflix, set in the Cyberpunk world?

A chance for a repeat of The Witcher 3?

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Many investors see the release of Edgerunners as a repeat of the success that The Witcher 3 achieved in terms of player numbers in response to the series' release on the Netflix platform. According to data released by NPD after the premiere of the first season of The Witcher series (December 20, 2019), CD Projekt saw a 554% increase in sales of the game compared to December 2018. Subtracting the release effect of the Nintendo Switch version of the game, which was released in October 2019, the increase was 63%. The average number of players in The Witcher 3, according to the SteamDB portal, increased from ~25,000 to more than 100,000. At the time of the release of the second season of the series, the number of players at its peak exceeded ~75,000.While in the first case the course reacted with a moderate increase, the day after the release of season 2 dived more than 12%.

Average number of players in The Witcher 3 according to SteamDB portal.

Source: Steamdb

Edgerunners premiere is a sales boost?

Some investors saw the Edgerunners series as a "Return of the King" opportunity for CD Projekt shares. The company's shares recorded a significant increase of more than 7% in value at the opening on Monday, following the successful premiere of the Edgerunners series on the Netflix platform. The plot of the series is set in the universe of the game Cyberpunk 2077, which is being played by an increasing number of people - according to the Steamcharts portal, the average number of players over the last 30 days is just over 22,000, representing more than 114% growth m/m.  The 24-hour peak in the number of players is over 86k. The release of patch 1.6 and the official announcement of the release of an add-on called Spectre of Liberty, scheduled for release in 2023, also contributed to the increase in the number of players and hype around Cyberpunk. However, it should be remembered that while in the case of The Witcher game the Netflix series significantly affected the number of players on Steam and the level of sales, when Cyberpunk the likelihood of an identical phenomenon seems to be much lower. Consider the significant discrepancy in player ratings. According to Metacritic, the average player rating for Cyberpunk is 7/10 for PC and next-generation consoles. This compares with a rating of 9.1/10 for The Witcher 3. In addition, the seven-year-old The Witcher 3, with the exception of the last week on average, is played by more players than the nearly 2-year-old Cyberpunk.

Average number of players for The Witcher 3 vs Cyberpunk 2077 according to the SteamDB portal.Source: Steamdb

Not surprisingly, after a morning rally in CD Projekt's shares, the almost all-day rise was wiped out, resulting in CD Projekt ending Monday's session up 0.16%. Yesterday, the company reported via Linkedin that the game Cyberpunk 2077, was played each day this week by 1 million players, both new and returning. However, no key information was given as to what % of this pool was made up of new players.

Where is the bull market?

It seems that investors are aware that the subsequent Cyberpunk news is more of an opportunity for a short-term play to prop up the price rather than a chance for a sustained, long-term trend change. This is evidenced, for example, by Monday's behavior of the company's share price, the still relatively average ratings for the game and the company's clear declaration that only one paid add-on will be released. Despite the understandable desire of some investors to believe that they will finally be able to cover the exit at zero on their losing positions on CD Projekt's shares, it seems that the closest opportunity to do so may not come until 2025, when the hype around the company is likely to rekindle, shot this time by hopes for the success of the next game from the Witcher universe. It seems that instead of waiting for the Cyberpunk swallow heralding the return of the green gaming boom, one should rather arm oneself with patience and a large supply of mulled wine, because the "winter is coming". Not just the calendar one.

 CD Projekt (CDR.PL) share price chart, D1 interval. Source: xStation5

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