CD Projekt reports 88% jump in first-half profit

Investing.com -- CD Projekt (WA:CDR) on Wednesday, reported an 88% surge in its first-half net profit on Wednesday, largely fueled by a surge in sales of its flagship game, Cyberpunk 2077.

The company posted a net profit of 170.0 million zlotys, while revenue for the first half of the year grew by 31%, reaching 424.8 million zlotys. 

Sales of "Cyberpunk 2077," including its "Phantom Liberty" expansion, soared by 81% to 257.7 million zlotys.

Analysts at Citi Research pointed out that expenditures on new projects decreased significantly by 38% year-over-year, yet saw a 13% increase quarter-over-quarter. 

They also added that operating cash flow (OCF) was up significantly year-over-year but had declined sharply quarter-over-quarter, suggesting some volatility.

CD Projekt also announced that it is preparing to move into the full production phase of Project Polaris (NYSE:PII), the first installment in the new Witcher series.

Several risks could influence CD Projekt's ability to reach the target price of ZL 99 per share. Upside risks include stronger-than-expected monetization of Cyberpunk 2077 (CP2077), robust sales of the upcoming CP2077 DLC, and an earlier-than-expected release of the next AAA title based on the Witcher franchise, analysts at Citi said. 

Additionally, improved visibility of long-term earnings and a sudden depreciation of the Polish Zloty (PLN) against the US Dollar, which would boost Zloty-denominated sales and margins, could positively impact the stock.

Conversely, downside risks include potential appreciation of the Zloty, which could negatively affect top-line revenue and profitability. 

Other risks include the potential cancellation of the IP Box tax relief by the government, delays in the company's long-term production plans, and rising labor costs, particularly in securing adequate teams for planned game development.