Market story: Geralt of Rivia's Christmas Rally

One of the companies that may be of particular interest to investors in December is CD Projekt, mainly thanks to improving Cyberpunk ratings and the premiere of The Witcher 3 for the next-gen consoles which will take place on December 14. Also Netflix series The Witcher - Blood Pedigree, which will be released on Christmas Day may have similar effect on sales as Edgerunners had on Cyberpunk. All this gives investors hope that this year Geralt will lead the rally on Warsaw Stock Exchange and will finally defeat the demon of bad sentiment that has been surrounding CD Projekt for almost two years.

Lights at the end of the tunnel that are (probably) not Strigoi eyes

Sentiment around CD Projekt is like Roach (the famous horse of the main character of Witcher universe), namely very volatile and unpredictable. However, around September 8, a light at the end of the tunnel appeared.

Firstly, the improving ratings of Cyberpunk on PC and the increase in the number of players driven by the premiere of the Netflix series "Edgerunners", thematically set in the cyberpunk universe, which premiered on September 13, 2022.

Secondly, the premiere of The Witcher - Bloodline series, which will be available on Netflix on December 25 may boost sales of The Witcher 3.

Thirdly, the release of The Witcher 3 on next-gen consoles, enriched with content inspired by The Witcher series from Netflix, which is to take place on December 14, 2022.

The foundations of success

On Monday after market close, CD Projekt published its Q3'22 results, which turned out to be record-breaking, compared to previous years.

• CD Projekt's net profit amounted to PLN 98.7 million, well above expected PLN 95.5 million. This is an increase of over 500% YoY.
• Revenues amounted to PLN 245.5 million versus the expected PLN 250.4 million. This is an increase of 70% YoY.
• EBIT amounted to PLN 97.1 million against the expected PLN 102.7 million. This is an increase of 521.2% YoY.
• The EBITDA rose to PLN 148.8 million and topped market estimates of PLN 136.3 million. This is an increase of 247% y/y.

Upbeat results in comparison with the previous year and the considerable dynamics in percentage terms were mostly caused by higher Cyberpunk sales and low base effect.

Future potential

It is worth mentioning the company's ambitious product strategy, which instilled hope in the hearts of fans by clearly signaling that further development of the Cyberpunk IP, multi-faceted monetization of the Witcher universe and the production of a new AAA game based on a completely new IP are planned.

The strategy for the next years assumes that the company will issue:

• A large expansion to Cyberpunk 2077, entitled "The Phantom of Freedom", planned for 2023. A team of over 350 people is working on it, the project is in the final stage of production

• Project Orion - this is the codename of 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 an introduction to the new witcher saga. It consists of three games that CD PROJEKT RED plans to release during a 6-year cycle, counting from the release of Polaris.

• Project Syrius, which will be set in the Witcher universe, but will differ from previous productions due to the fact that it is aimed at a much wider audience. Syrius will offer both single and multiplayer gameplay. The Boston studio The Molasses Flood will be responsible for the project.

• Project Canis Majoris, another game from the world of The Witcher - will be a full-fledged production developed by an external studio led by experienced developers associated with this universe in the past. According to a message from The Witcher's official Twitter account, it may be a remake of the first part of The Witcher, this time developed on Unreal Engine 5.

• The Hadar project - a completely new, original IP, on which conceptual work began in 2021.

A spoonful of tar in a barrel of Christmas pudding

An important risk factor is the reawakened expectations towards the Cyberpunk expansions and the doubts of some commentators regarding the sense of further development of the Cyberpunk franchise, especially the release of the second part of the game, while the first installment met with a very negative reception from players and investors. Many investors fear that publishing a good game may not be enough to bring the stock price back to its highs.

It seems that we can only keep our fingers crossed for CD Projekt and hope that it has learned from Cyberpunk's failure and in the future this ambitious studio will achieve even greater success than the one with The Witcher 3.