Video Game Stock Roundup: EA, IGT, And Activision In Focus

Video game stocks were mostly positively skewed following a more or less solid earnings season and game launches. One of the major events over the past five days was NetEase, Inc.’s (NTES - Snapshot Report) announcement of a joint venture to enter Internet finance businesses and expand beyond the video game industry. Further, the launch of a rebooted version of Electronic Arts Inc.’s (EA -Analyst Report) Need for Speed and production halt of Nintendo Co. Ltd.’s (NTDOY -Snapshot Report) 8GB Wii U Basic console remained in the news.

In addition, Activision Blizzard Inc.’s (ATVI - Snapshot Report) lawsuit settlement with one of its stockholders and contract win in Germany by International Game Technology PLC (IGT) grabbed headlines.

Top Stories Oover the Last Week

1.    On May 20, Activision settled a case with one of its stockholders who had challenged the company’s $8 billion deal to reacquire its stock from Vivendi SA. The plaintiff allege that Activision's CEO and co-chairman manipulated the deal favoring their interests, and barred stockholders from gaining control of the company. The Call of Dutygame maker finally paid $275 million as settlement and $72.5 million as fee to the litigant’s law firm.

2.    On May 20, NetEase announced that its subsidiary — Ujia E-commerce Co. — will form a joint venture focused on Internet crowdfunding and other Internet finance businesses. The China-based gaming company and web portal will enter into a joint venture with Shanghai-based Everbright Securities (a financial firm) and HNA Group (financial as well as logistics and aviation service company).

Under the agreement, the total registered capital of the joint venture company will be approximately RMB100 million ($16.1 million). Of these funds, RMB30 million, RMB40 million and RMB30 million will be contributed by Ujia, Everbright and HNA Group, respectively. Notably, NetEase’s stock gained 3.7% following the announcement. 

3.    Electronic Arts’ Need for Speed reboot launched this summer has been designed for the new generation console, and represents the first PS4/XB1/PC-only game in the Need for Speed series so far. According to the company, the new game promises extensive customization, authentic urban car culture, a nocturnal open world and an immersive narrative. However, going by the trailer, it only projects the usual “fast cars escape cops” theme that the series has always had. We believe that the latest Need for Speed version will help attract more consoles and PC players, making it more accessible to video game lovers.

4.    Nintendo is downsizing the production of its popular Wii U in Japan. The Japanese multinational consumer electronics company, is about to halt production of its 8GB Wii U Basic in Japan, according to reports. The product has been on the market since 2012, but was never as successful as its 32GB counterpart. However, the company will continue to sell the black 32GB Wii U and plans to launch its white version.

5.    International Game Technology announced that it will offer its new Niedersachsen Jackpot Wide Area Progressive (WAP) at Germany-based Spielbanken Niedersachsen casinos. The new Niedersachsen Jackpot will comprise 56 machines across 10 casinos.

Performance

The following table shows the price movements of the major video game companies over both the past 5 trading days as well as the last 6 months:

 

 

 

 

 

 

 

 

 

 

 

 

 

Over the last 5 trading sessions, the company that gained the maximum was Take-Two Interactive Software Inc. (TTWO - Snapshot Report) increasing 11.9% driven by solid fourth-quarter fiscal 2015 earnings reported on May 19. The stock which lost the most was Glu Mobile, Inc. (GLUU - Snapshot Report) declining 3.9%.

Over the 6-month period, Electronic Arts surged the most — nearly 44.1%. We believe that the continued growth in the company’s mobile gaming audience makes it one of the most consistently performing video game makers in the current times.

In addition, strategic collaborations with the likes of Google (GOOG), Apple (AAPL) and Facebook (FB) in developing its gaming platform will add to its bottom-line growth over the long term. However, the stock that gained the least over the same time frame was Microsoft, up 0.2%.