Weekly Notes On Gaming Industry: Electronic Arts, GameStop, Activision Blizzard
Conditions in the gaming industry remain stagnant, as gamers are still spending more on new consoles and less on new software titles. Even 12 months after their launches, the new generation consoles – Microsoft’s (NASDAQ:MSFT) Xbox One and Sony’s PlayStation 4 – are still in strong demand among core gamers. According to the NPD research group, consumers spent nearly $273 million on new consoles in October 2014, up 59% year-over-year (y-o-y). Despite the launch of some core titles, such as Activision Blizzard’s (NASDAQ: ATVI) Destiny and Skylanders TRAP TEAM, as well as Electronic Arts’ (NASDAQ:EA) FIFA 15 and Madden NFL 15, consumer spending in the U.S. on new software titles declined 28% to $350 million in the month of October. [1] In terms of title sales, Destiny slipped to #5 position in terms of total units sold, followed by Skylanders, FIFA 15 and Madden NFL 15.
Here’s a quick round up of some news related to the gaming industry covered by Trefis.
GameStop
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GameStop (NYSE:GME), the video game retailer, is scheduled to release its third fiscal quarter earnings report on November 20. With strong demand for new consoles over the last 3 months, GameStop might deliver improved year-over-year results. Moreover, the company’s unique buy-sell-trade model has been driving revenue growth for the company, despite declining software sales. As industry-wide software sales typically rise in the holiday season (November and December), the company’s title sales should see a boost, due to the recent releases of some popular titles.
GameStop’s stock traded between $42-$45 during last week. Our price estimate for the company’s stock is $43, implying a market cap of $4.8 billion,which is slightly below the current market price.
See our complete analysis of GameStop
Electronic Arts
Electronic Arts (NASDAQ:EA) continued to deliver excellent financial results, as it reported net non-GAAP revenues of $1.22 billion in its second fiscal quarter, up 17% year-over-year (y-o-y) and 7% above the given guidance. [2] The impressive quarterly performance was greatly boosted by the company’s recently released FIFA 15 and Madden NFL 15. Apart from these major titles, Battlefield 4, Titanfall, FIFA 14 and Plants Vs Zombies Garden Warfare performed fairly well in their respective genres. However, both sports titles were released close to the quarter’s end, and their impact will be witnessed in the next two months.
EA’s stock traded close to the $41 mark during the last week. Our price estimate for the company’s stock is $39. implying market cap of $12 billion, which is slightly below the market price.
See our complete analysis of Electronic Arts stock here
Activision Blizzard
Activision Blizzard (NASDAQ: ATVI) had a strong third quarter, as it reported a 9% year-over-year increase in the company’s net GAAP revenues. [3] Moreover, the company released its annual edition of the blockbuster franchise Call of Duty Advanced Warfare on November 4, the financial impact of which will be visible in the next earnings report. However, the company is confident of its title sales in this holiday quarter, with strong contribution from its first person shooter (FPS) titles.
Activision’s stock declined from $21 to $20 during the last week. Our price estimate for Activision is $22.50, which is 12% above the market price.
See our complete analysis of Activision’s stock here
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