Monthly Notes On Gaming Industry: Electronic Arts & GameStop

Given the major announcements made at the recently held 2015 Electronic Entertainment Expo (E3) in Los Angeles, California, the U.S. gaming industry might see a different phase in the second half of the calendar year. Unlike the first half of 2015, which witnessed the absence of major core video game titles, the holiday season of 2015 is ready to experience the launch some of the biggest names in the industry. According to research firm NPD, gamers spent $1.43 billion in the first five months of 2015, merely 1% year-over-year (y-o-y), down from last year’s figure over the same period. However, the topic of concern is the hardware sales figure, which was down 11% y-o-y compared to the first five months of 2014. The decrease in demand of previous generation consoles led to the sluggish growth in hardware sales. ^[1]

In the E3 2015, top game developers such as Electronic Arts (NASDAQ:EA), Activision Blizzard (NASDAQ: ATVI), and Ubisoft, as well as video game hardware developers such as Microsoft (NASDAQ:MSFT) and Sony, showcased the highlights of their products and other releases. Here’s a quick round-up of some news related to the gaming industry covered by Trefis.

Electronic Arts

Electronic Arts (NASDAQ:EA) was one of the highlights of the E3 event this year, as the company showcased demos, trailers, and details about its upcoming releases for this year. The games to feature in EA’s pre-event conference held on July 15^th include: Mass Effect Andromeda, Need For Speed, Star Wars: The Old Republic, Star Wars Mobile Game, NBA Live 16, Plants Vs Zombies Garden Warfare 2, Mirror’s Edge: Catalyst, NHL 16, Rory McIlroy PGA Tour, Madden NFL 16, and FIFA 16. The return of the Need For Speed franchise attracted many gamers, who are now eagerly awaiting the release of the new racing title. (See: Electronic Arts’ highlights at this year’s E3 event) 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. ^[2]

EA’s stock traded between the range $62 and $64 for the first half of June 2015, and rose steeply to $67 after the E3 event. Our price estimate for the company’s stock is $65, implying a market cap of $20 billion, which is 5% below the current market price. Trefis forecasts EA’s net revenue to reach $5.6 billion for the year 2015.

See our complete analysis of Electronic Arts stock here

GameStop

GameStop (NYSE:GME) had an impressive first quarter earnings report for the fiscal 2015, with same store sales growth of 8.6%, compared to 5.8% growth in the same period last year. ^[3] Recently, GameStop announced its intent to acquire Geeknet, the leading brand in the collectibles category, as a step to expand its multichannel business. The deal is valued at a total $140 million approximately, which includes $37 million in cash and cash equivalents. ^[4] Furthermore, this year’s GameStop EXPO, the fourth installment, is scheduled to be held on September 2 at the Sands Expo and Convention center. ^[5]

GameStop’s stock rose gradually from $40 to $44 during the month of June. Our price estimate for GameStop is $41, which is roughly 7% below the current market price. Trefis forecast for GameStop’s net revenue is $9.9 billion for 2015.

See our complete analysis of GameStop’s stock here

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More Trefis Research

1. May NPD games sales [↩]
2. Need For Speed returns in an action driving experience that unites the culture of speed [↩]
3. GameStop, Q1 2015 earnings call transcript [↩]
4. GameStop Corp. announces agreement to acquire Geeknet, Inc. [↩]
5. The party is coming back to Las Vegas with GameStop EXPO 2015 [↩]