Weekly Notes On Gaming Industry: Electronic Arts & Activision Blizzard

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Electronic Arts

The first trimester of 2015 has brought some respite for the game developers, as the gaming industry is showing some signs of improvement in terms of software sales. According to the research group NPD, gamers spent $595 million on new physical software, hardware, and other accessories, up 3% year-over-year (y-o-y) in April 2015. However, the hardware sales were down 4% y-o-y to $184 million, due to a strong comparison with last year’s April sales, as well as a 55% decline in demand for previous generation consoles. In terms of unit sales, the demand for new generation consoles drove the growth by 12%. Microsoft’s Xbox outpaced Sony’s PlayStation consoles in April. On the other hand, software sales witnessed 13% y-o-y growth to $256 million. [1] For the first trimester, hardware sales were down 10% y-o-y, whereas the software sales strengthened by roughly 5%.

Here’s a quick round-up of some news related to the gaming industry covered by Trefis.

Electronic Arts

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Electronic Arts (NASDAQ:EA) finished its fiscal 2015 with strong revenue figures in its Q4 earnings report released on May 5. The company’s GAAP net revenues jumped more than 5% year-over-year (y-o-y) to $1.185 billion in the fourth quarter, with a 25% y-o-y increase in the digital revenues, which now account for nearly 52% of the total revenues. [2] The company’s core sports titles and the new releases: Dragon Age: Inquisition and Battlefield: Hardline, drove the revenue growth. On March 31, the company announced the release of the first expansion pack for The Sims 4 (The Sims 4 Get To Work), on PC and Mac in North America. [3] On May 21, EA released the teaser trailer for one of the most awaited racing titles this year: Need For Speed, which will be launched in the fall of 2015 for PC, PS4, and Xbox One. [4]

EA’s stock traded between $62 and $63.50 during the last week. Our price estimate for the company’s stock is $54, implying a market cap of $17 billion, which is more than 10% below the current market price.

See our complete analysis of Electronic Arts stock here

Activision Blizzard

Activision Blizzard (NASDAQ: ATVI) reported better than expected results in its first quarter earnings report, with 15% y-o-y growth in GAAP net revenues. GAAP digital revenues reached a record $581 million for the quarter, and were a record 45% of the total GAAP net revenues. [5] The company was recently included in the Fortune’s list of top 100 best companies to work for. [6] Moreover, Blizzard Entertainment announced the first-ever global tournament for new online game: Heroes of the Storm, to be held at BlizzCon on November 6th and 7th [7]

Activision’s stock traded between $25.40 and $25.80 during the last week. Our price estimate for Activision is $25.88, which is roughly the same as the current market price.

See our complete analysis of Activision’s stock here

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Notes:
  1. April 2015 NPD games data []
  2. Electronic Arts, Q4 2015, earnings call transcript []
  3. The Sims 4 Get to Work is now available []
  4. Need For Speed returns in an action driving experience that unites the culture of speed []
  5. Activision Blizzard, Q1 earnings call transcript []
  6. 100 Best Companies to work for, Fortune []
  7. Activision Blizzard, Investor Release []