Weekly Notes On Gaming Industry: GameStop, Activision Blizzard & Electronic Arts

-16.65%
Downside
13.91
Market
11.59
Trefis
GME: GameStop logo
GME
GameStop

The holiday season is over and the gaming industry, in 2014, has managed to outperform 2013’s performance. For the entire calendar year of 2014, gamers spent roughly $5.1 billion on physical hardware for video games, up more than 18% y-o-y, offsetting software sales, which were nearly $5.3 billion, down 13% y-o-y. As a result, the total revenue for the industry in the U.S. was up 1% y-o-y. This indicates the strong demand for the new console generations: Microsoft’s Xbox One and Sony’s PlayStation4.  ((NPD December 2014 report)) Among the titles, Call of Duty: Advanced Warfare, the franchise’s new edition, managed to outsell every other game from every other genre. [1] Just before the holiday quarter, Microsoft lowered the prices of its latest console: Xbox One. As a result, Xbox One outsold PlayStation 4 in November and December.

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

GameStop

Relevant Articles
  1. Will GameStop Stock Continue To Rise?
  2. What’s Next For GameStop Stock After Rising 26% Last Week?
  3. Can GameStop Stock Advance Continue After A 92% Surge In A Week?
  4. Vaxart, Macy’s, Gogo: Will These Stocks See A GameStop Like Short Squeeze?
  5. Time To Sell GameStop Stock After A 170% Rally?
  6. How Is GameStop Likely To Have Fared In Q1?

On January 13, GameStop (NYSE:GME) released its sales report for the nine-week holiday period ending January 3 and reported total global sales of $2.94 billion, down 6.7% y-o-y. Furthermore, the results were negatively impacted by the foreign currency exchange rates. Moreover, the comparable store sales dropped 3.1% y-o- y, out of which the U.S. witnessed a 3.3% y-o-y decline, whereas the international stores witnessed a 2.7% decline. If we look at this month-wise, November comparable store sales declined a massive 12% y-o-y, primarily because the last year’s November witnessed the launch of new consoles (PS4 and Xbox One).  On the other hand, December’s comparable store sales rose 4.4% y-o-y. [2] Based on these results, the company changed its guidance for the fourth quarter.

GameStop’s stock rose from $37 to $39, before falling to $36 during the last week. Our price estimate for the company’s stock is $42, implying a market cap of $4.8 billion, which is nearly 15% above the current market price. We are factoring in changes in our model for the company and will update it shortly.

See our complete analysis of GameStop

Electronic Arts

Electronic Arts (NASDAQ:EA) released its Q3 earnings report on January 27 and reported strong numbers, as the company reported non-GAAP net revenue of $1.43 billion, which was 12% above the guidance, but down 9% year-over-year (y-o-y). On a trailing twelve month basis, EA’s non-GAAP net revenue reached $4.337 billion, and digital receipts accounted for more than half of the revenues ($2.178 billion) for the first time ever, up 17% y-o-y. The company’s core sports titles: FIFA 15, Madden NFL 15, and Hockey Ultimate Team services recorded a massive 82% y-o-y growth. [3]

EA’s stock rose from $49 to $55 during the last week, after the release of its Q3 report. Our price estimate for the company’s stock is $39. implying a market cap of $12 billion and we are factoring in changes in our model for the company and will update it shortly.

See our complete analysis of Electronic Arts stock here

Activision Blizzard

Activision Blizzard’s (NASDAQ: ATVI) is scheduled to release its Q4 2014 report on February 5, 2015. The company is fairly confident of its performance during the holiday quarter, with Call of Duty: Advanced Warfare and Destiny leading the FPS genre.  As of January 3, Call of Duty: Advanced Warfare has sold approximately 17.6 million units, whereas Destiny sold nearly 10 million units. Considering that Destiny is a new franchise and that it was the 6th highest title sold globally in 2014, it might just be the next big FPS franchise in the gaming world. Moreover, the company has been introducing new expansion packs for its World of Warcraft (WOW) franchise.

Activision’s stock traded between $20 and $21 during the last week. Our price estimate for Activision is $21, which is roughly the same as the current market price.

See our complete analysis of Activision’s stock here

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap

More Trefis Research

Notes:
  1. Global yearly chart 2014, VGChartz []
  2. GameStop reports 2014 holiday sales results []
  3. Electronic Arts Q3 2015 earnings call transcript []