Market story: CD Projekt - synergy effect of positive informations 📈

11:15 AM October 5, 2022

Yesterday CD Projekt released its first strategy update since March 2021. We got a powerful dose of ambitious plans and announcements that give the Witcher creators' bad streak a chance to finally pass. To summarize the information published by CD Projekt IR, the company plans to release:

  • The Witcher 3: The Wild Hunger version for the latest generation of consoles in Q4 2022.
  • A major expansion to Cyberpunk 2077, titled "Specter of Freedom" planned for 2023. A team of more than 350 people is working on it, and the project is in the final stages of production.
  • Project Orion, code-named the next game in the Cyberpunk series. It will be developed by the new CD PROJEKT RED North America studio.
  • Project Polaris, which will be the opening of the new Witcher saga. It is to consist of three games, which CD PROJEKT RED studio plans to release during a 6-year cycle, counting from the release of Polaris. 
  • Project Sirius, which will be set in the Witcher universe with its storyline, but will differ from previous productions due to the fact that it is aimed at a much wider audience. Sirius will offer players both single-player and multiplayer gameplay. Boston-based studio The Molasses Flood will be responsible for the development.
  • Project Canis Majoris, another game from the world of The Witcher -- will be a full-fledged production developed by an external studio headed by experienced developers associated with the universe in the past. 
  • Project Hadar -- a brand new original IP, on which early conceptual work began in 2021.

While 350 people are working on the DLC for Cyberpunk and the project is in the final stages of production, the company communicates that a team of 350 to 500 people is needed to work on a single project. As a result, CD Projekt intends to significantly increase employment and, consequently, personnel costs. During the period without launches, the company intends to focus on monetizing the back catalog. Continued interest in CD Projekt and its games may be helped in the near term by the premiere of The Witcher: Blood Origin series, which draws on the Witcher universe, scheduled for late December on Netflix. 

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CD Projekt's planned product expansion

Source: CD Projekt IR Twitter account

The company also remains active in the M&A market, although as CEO Adam Kicinski said, no concrete talks are underway at this time. CD Projekt is also opening up to licensing its franchises when it comes to mobile. According to the CEO: "We are open to cooperation with external partners who specialize in this segment. We are in talks, but it is too early to communicate anything more on this."

nother positive piece of information, though not surprising, is the management's announcement that the company will finance new games from its own resources, without the need for external financing. The last piece of news that may support the share price in the coming days is the shares buyback initiated by the company to the value of PLN 100 million, which will run from October 5 to 28.

CD Projekt decided to take one "hard hit" with a lot of positive information that had been firing investors' imagination for several days, which was evident from the share price. Today we are dealing with a classic euphoric opening and the subsequent selling of facts. The future of the CD project looks promising, on the condition that it would succeed in delivering all the announced projects in the quality of The Witcher 3, so that Cyberpunk could be considered a painful but just one-off "work accident."  However before investor sentiment succumbs too quickly to a wave of hurricane optimism, it's worth remembering that at the end of the day, what matters is proving quality and earning cash. And that's what we are waiting for.

Chart of CD Projekt (CDR.PL), interval H4. We can see the 'golden cross' inside the chart, when the 50 SMA crossed upside the 200 SMA, which can be one of main technical signals of downside trend reversal. Source: xStation5

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