Monthly Notes On Gaming Industry: Activision Blizzard & Electronic Arts

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ATVI: Activision Blizzard logo
ATVI
Activision Blizzard

The holiday season is here. Every year, the gaming industry looks forward to this period, as the video-game software and hardware sales do well during the holiday season. Some of the top video game developers release new editions of their core franchises just before the season. However, the interesting fact to note this year, is that the software sales are picking up pace, whereas the hardware sales have taken a step back, as the demand for previous generation consoles has declined tremendously. According to the NPD game sales data, the software sales for the 10 month period of 2015 are in-line with the last year’s similar period. On the other hand, hardware sales over the same period declined more than 9% year-over-year (y-o-y). [1]

Here are some monthly updates related to some of the gaming companies covered by Trefis:

Electronic Arts

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After reporting strong Q2 results for the fiscal 2016, EA is confident ahead of the holiday season. Moreover, the company released the new edition of Need for Speed, on all major gaming platforms, after a break of one year. [2] Needless to say, it is one of the most awaited games of the year. The return of Need For Speed is attracting many racing game lovers, and the incremental revenues from this franchise will certainly boost the company’s revenue growth in the holiday season of 2015. On the other hand, the company’s core sports titles are performing extremely well in terms of unit sales. (See: Declining Demand Of FIFA 16 On Older Platforms Hurting Electronic Arts)

EA’s stock dropped nearly 8% from $75 to $69 in the month of November 2015. Our price estimate for EA is $75, which is roughly 10% above the current market price.

ea st

Activision Blizzard

Activision Blizzard reported strong digital revenue growth in its Q3 2015 earnings result, as the non-GAAP digital revenues rose 38% year-over-year (y-o-y). [3] Activision’s core franchise, Call of Duty: Black Ops III, was launched worldwide on November 6, 2015. [4] According to the company, the title is the biggest title launch of the year, as the new edition exceeded $550 million in sell-through worldwide in the first three days. [5] However, the highlight from the earnings still remains the acquisition of King Digital Entertainment by Activision for $5.9 billion.

ATVI’s stock rose more than 8%, from $34 to $37, to its all-time high, during the month of November 2015. Our price estimate for ATVI is $31, 16% below the current market price. However, we are still in the process of revising our targets.

atvi st

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Notes:
  1. October 2015, NPD game sales data []
  2. Need for Speed takes back the streets []
  3. Activision Blizzard, Q3 2015, earnings call transcript []
  4. Black Ops is back! Call of Duty: Black Ops III available now worldwide []
  5. Call of Duty: Black Ops III scores over half a billion dollar opening weekend []