The firm's analyst Michael Pachter has pointed out that Ubisoft continues to gain market share with its "aggressive next generation strategy". He notes that the NPD US retail game sales data for January suggests that Ubisoft's revenues are up 73 per cent compared with the same period last year.
"We are establishing our FY09 estimates for revenue of Euro 910 million and EPS of Euro 1.50," stated Pachter. "Our estimates imply 18 per cent revenue growth and contribution margin of only 15 per cent. We believe that both are conservative, as we expect industry sales growth of 17 per cent and believe that Ubisoft's contribution margin is close to 35 per cent.
"In our view, Ubisoft is well positioned to gain market share in FY09, suggesting that its revenue growth could exceed 20 per cent. We also believe that the company will manage its R&D spending growth to somewhere closer to 16 per cent annually, implying an opportunity for even greater operating leverage.
"We believe that Ubisoft is a compelling investment. If our assumptions about market share gains and contribution margin are correct, we think the company could substantially exceed our estimates, driving its share price even higher."
Wedbush today maintained its 'Buy' rating on Ubisoft and raised its 12-month target price from Euro 34 to Euro 45.