Monthly Notes On Gaming Industry: Activision Blizzard & Electronic Arts

January 29th, 2016 by Trefis Team
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ATVI: Activision Blizzard logo
ATVI
Activision Blizzard

The gaming industry performed less than expected in the holiday season, as the gamers spent $3.22 billion in the month of December, down 1% year-over-year (y-o-y), according to the game sales data by NPD group. [1] Both the software and hardware sales were down in the month primarily due to the declining demand for previous generation consoles and their games. Hardware sales declined by 6% y-o-y due to a 71% decline in previous generation console sales and a 32% drop in portable hardware sales. On the other hand, it was a big season for some of the biggest releases, such as EA’s StarWars, FIFA 16,  and  Madden NFL 16, as well as Activision’s  Call of Duty: Black Ops III.

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

Electronic Arts

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Electronic Arts (NASDAQ: EA) recently released its Q3 2016 earnings results and posted a 26% y-o-y increase in the non-GAAP net revenues, primarily driven by strong unit sales of StarWars and Need For Speed (2015). While Madden NFL 16 remained the highest selling sports title in the U.S., FIFA 16 topped the charts across all genres in Europe. Monthly active users grew 10% year-over-year (y-o-y) in the third quarter of fiscal 2016. In the mobile segment, Madden NFL mobile was a huge hit in the U.S. over the holiday season, as monthly active players increased 50% year-over-year (y-o-y) and it was among the top three grossing apps in the U.S. StarWars was probably the most successful franchise for the company this holiday season. StarWars Battlefront became one of the largest game launches ever for the  StarWars franchise. To keep the momentum going, the company recently introduced the first free content update and the four expansion packs for the franchise. ((Electronic Arts, Q3 2016, earnings call transcript))

EA’s stock dropped from $70 to $63 in the first half of January 2016, before jumping back to $69 before the results. Our price estimate for EA stock is $75, which is roughly 8% above the current market price.

ea st

Activision Blizzard

Activision Blizzard’s (NASDAQ: ATVI) is scheduled to report its Q4 2015 earnings report on February 11, 2016. [2] The company recently announced the opening of its eSports division for competitive gaming, with Steve Bornstein, former CEO of ESPN, as the division’s chairman. [3] (See: Electronic Arts & Activision Blizzard Ready To Enter eSports Market) On January 4, the company announced the decision to acquire the business of Major League Gaming (MLG) to expand its eSports ecosystem. [4] MLG’s proficiency in creating premium content and its broadcast technology platform will be a boost for Activision in the coming years.

ATVI’s stock dropped from $39 to $34 over the month of January. Our price estimate for ATVI stock is $37.50, which is roughly 10% above the current market price.

atvi st

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Notes:
  1. NPD December 2015, game sales data [↩]
  2. Activision Blizzard, Earnings conference call [↩]
  3. Former CEO of ESPN Steve Bornstein and MLG co-founder Mike Sepso to lead Activision Blizzard’s new division devoted to eSports [↩]
  4. Activision Blizzard acquires the business of Major League Gaming [↩]