CyberAgent Earnings: Conservative 2025 Guidance but Upside Potential in Gaming; FVE of JPY1,200

CyberAgent reported revenue and operating profit of JPY204 billion and JPY5.9 billion, respectively, in the September quarter, which was broadly in line with our expectations after considering the impact from irregular losses. For the fiscal year ending September 2025, the company guided for a modest 2.1% year-on-year increase in net sales to JPY820 billion, and a 0.4% year-on-year increase in operating profit to JPY42 billion. We toned down our revenue and operating profit forecasts for 2025 to JPY844 billion and JPY44 billion, respectively, from JPY849 billion and JPY48 billion previously, mainly due to a less aggressive mobile game revenue estimate, and a more gradual margin recovery for the internet advertisement business. However, we believe guidance is still conservative compared with our new projections. We are confident that the media and internet advertisement businesses will continue to expand profits, and successful new game releases will help stabilize the game business revenue. Therefore, our long-term outlook for CyberAgent remains intact, and we make no change to our fair value estimate of JPY1,200. We think the stock is slightly undervalued now.