Company Reports

Narrow-moat CyberAgent’s March-quarter results beat our estimates, mainly due to higher-than-expected game top-line growth driven by the successful launch of its AAA console game title and resilient mobile game sales. Although the game business’ surprise rebound stole the spotlight, also commendable were the media segment achieving quarterly profit for the first time since the company started investing in the Abema business and the digital advertising businesses’ solid sales growth and margin improvement. These gave us more confidence in CyberAgent’s cross-media strategy to improve returns by monetizing its game IPs over the longer term across multiple platforms and by having Abema as its own ad platform for internet advertisement clients.

In Japan, CyberAgent has been a top player in both digital advertising and mobile gaming for many years. It owes its success to its operational knowledge, expertise in digital advertising and game development, and deeply entrenched relationships with suppliers and clients, which we believe will help it stay ahead of competitors for at least the next 10 years.

CyberAgent’s December-quarter results exceeded our expectations, mainly due to a stronger improvement in the profitability of the media segment and robust revenue growth in the advertising segment. While we view near-term results positively and believe the company is on track to surpass its fiscal-year 2024 guidance, we are still uncertain about the mid- to long-term outlook for the game business, as we believe it will be difficult to fundamentally improve margins without ramping up releases of original intellectual property, or IP, games. Therefore, although we are raising near-term margin forecasts, we maintain our fair value estimate of JPY 1,000 based on a conservative outlook for the game business. We think shares are currently fairly valued.

In Japan, CyberAgent has been a top player in both digital advertising and mobile gaming for many years. It owes its success to its operational knowledge, expertise in digital advertising and game development, and deeply entrenched relationships with suppliers and clients, which we believe will help it stay ahead of competitors for at least the next 10 years.

We initiate coverage of CyberAgent, one of the top digital advertising agencies and mobile game publishers in Japan with our fair value estimate of JPY 1,000 and a narrow moat rating. CyberAgent also operates a media business which is currently not profitable, but we believe it has good synergies with the advertising and gaming segments. CyberAgent has built over 20 years of expertise and long-term relationships with platforms and clients in the digital advertising space. The firm’s game business has several long-running popular original IP games and also has a long history of developing mobile games based on popular IP owned by console game developers. Abema, an internet TV platform co-owned by CyberAgent and TV Asahi, provides advertising slots to CyberAgent’s digital advertising clients, as well as an outlet for tie-up animation featuring CyberAgent’s games IP. As such, we believe that no other advertising agency or game publisher can replicate all the capabilities and connections that CyberAgent has in all of the above areas, so we believe that the firm will remain one of the market leaders in the digital advertising as well as the game industry. We believe the stock is currently fairly valued.

In Japan, CyberAgent has been a top player in both digital advertising and mobile gaming for many years. It owes its success to its operational knowledge, expertise in digital advertising and game development, and deeply entrenched relationships with suppliers and clients, which we believe will help it stay ahead of competitors for at least the next 10 years.