CyberAgent Earnings: More Confidence in Game Longevity and Cross-Media Strategy; Shares Undervalued

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.