Stock of the week: CD Projekt

• CD Projekt trades 35% year-to-date higher

• Cyberpunk 2077 premiered last night

• Pre-orders exceeded 8 million copies

• Sales report expected before Christmas

• Investors scared by mixed reviews

CD Projekt (CDR.PL) is one of the biggest stocks in the Polish WIG20 index. Video game developer has made its name thanks to a highly successful The Witcher series. The latest title from the company - Cyberpunk 2077 - was released today and investors hope it will be as successful as The Witcher 3: Wild Hunt. Data from platforms like Steam shows that it may be even more successful. Let's take a closer look at orders data, forecasts as well as reviews from critics.

Long-awaited game

Cyberpunk 2077 is likely the most awaited game of 2020. Announced as far back as May 2012, it was set to premiere in April this year. However, the launch date was postponed three times and the game was finally released last night. According to Steam stats, over 1 million players were playing the game at the peak of premiere night and it was the most played title at the time. Moreover, it was most likely the best game launch in history when it comes to concurrent players. To put this figure into context, CD Projekt's blockbuster The Witcher 3: Wild Hunt attracted 92 thousand players on Steam during premiere night peak. Cyberpunk 2077 interest was so big that Steam even experienced issues last night.

Pre-orders exceed expectations

CD Projekt said that based on data from distributors, pre-orders exceeded 8 million copies. Adam Kiciński, CEO of CD Projekt, said in an interview with Bloomberg that such high pre-order sales turned out to be much better than the company had expected. To show how much more hype surrounded the release, let's just say that The Witcher 3: Wild Hunt pre-orders stood at 1.5 million copies. Data may be hard to compare as the two games are different and landscape for video game developers have changed since the last title in The Witcher series was released (May 2015) but it shows that Cyberpunk 2077 has a high chance to be the next big moneymaker for CD Projekt. 

A look at share price of CD Projekt (CDR.PL) at M30 interval shows that investors have grown concerned about recent Cyberpunk 2077 reviews. High amount of glitches noticed by critics has sent shares lower even before game was launched. In spite of solid pre-orders data announced today, stock continues drop towards support near 355 PLN. Source: xStation5

Mixed reviews from critics and gamers

High interest during launch can be ascribed to the hype CD Projekt has built around the game. The game was teased for over eight years and delays to release date has made Cyberpunk 2077 a title to watch for gamers. However, in spite of delays that were reasoned with a will to make the game perfect, gamers have complained about numerous bugs and glitches in the game. This has weighted on initial ratings, although those can still be seen as high. The question now is whether CD Projekt manages to fix them in a timely manner. If it fails to do so, long-term outlook for Cyberpunk 2077 sales may weaken. CD Projekt focuses on big titles and releases new game once every few years so missing gamers' expectations could be a costly mistake. A point to note is that The Witcher 3: Wild Hunt continues to generate significant profits for the company even as 5 years have passed since the launch date and sales received another boost last year following launch of Netflix's series. 

What's next?

CD Projekt's CEO said that company plans to release a Cyberpunk 2077 sales report before Christmas and it is likely to be the nearest set of "hard" data to gauge interest and outlook. Some forecasts say that sales in the first two weeks after the launch could exceed 20 million copies range. In meantime, investors may track online ratings to try to asses whether CD Projekt has lived up to the task of fixing bugs and making the game more enjoyable for players. Looking beyond Cyberpunk 2077, it is worth noting that in an interview with Bloomberg, Adam Kiciński said that he would love to do another game in The Witcher series and it could be a hint on what the video game developer plans to do next. While there is no confirmation, strong gamers' sentiment towards the series would surely support reception.

A look at higher time frame shows that 161.8% exterior retracement of the May-June correction at around 460 PLN serves as a ceiling for shares with two failed attempts of breaking above recently. Stock has plunged below 200-session moving average today and the support zone near 355 PLN is the closest one to watch. However, unless we see a break below the lower limit of the Overbalance structure at 333 PLN, short positions could be a risky play. Source: xStation5