CD PROJEKT RED: The AMEX of the Big Gaming Industry? (Part 2)

Keanu Reeves Whispering: "Capital-Light 'Tech' Biz with Strong Brands & Sticky Customers. Highly Recurring FCF. Insider Ownership: 34%. Gross D/E: 1.5%. Average ROE: 20%. Past 10Y Earnings CAGR: 25%."

May 22, 2023

∙ Paid

This is Part 2 of the CDPR stock report. Click here to read Part 1, or click here to read our Big Gaming industry primer.

HIGHLIGHTS:

15% LT Growth (conservative) at 15x Forward P/E — When Buffett acquired AMEX in 1963, markets hated it just as much as they hate CDPR today due to their immediate circumstances — but AMEX turned out one of his most lucrative investments. For truly LT investors, CDPR sports the same ‘moaty growth’ characteristics and ‘point of maximum pessimism’ valuations today — a truly wonderful business at a fair price.
25% Earnings CAGR over the Past 10 Years — Even after the Cyberpunk 2077 fiasco, CDPR has managed to grow its average earnings by 25% CAGR over the past 10 years. This is simply the nature of Big Gaming businesses with their endless moats, which experience a step-function change in profits every time they release a new successful hit AAA game/franchise — CDPR has already confirmed 6 incoming new titles over the next 10 years.
Is JPM Refitting Their Target Price Around Sellside Consensus? — Why did JPM slash their terminal growth rate by -33% in 6 months, despite nothing much having changed in CDPR’s fundamentals during that time? We explore the justifications behind CDPR sellside consensus valuations in this report.
This Is An OTC stock (OTGLY, OTGLF) — I initially didn’t realize that this was an OTC stock until I had already completed my research! CDPR’s stock is perfectly tradable in US markets, but OTC stocks may be subject to Trading Permissions by certain brokers (please see footnotes,, for possible solutions, or reach out to me in the comments for advice). In the future, I won’t cover OTC stocks — but fortunately, CDPR happens to be one of the most recognizable US gaming brands with largely NA revenues. The stock can also be found under the Polish ticker WSE:CDR.