Over the last five trading sessions, Video Game stocks have mostly been trending downward despite the absence of any major negative event. We believe that the decline in market indices were primarily responsible for this drop.
Major news highlights over the past week include Activision Blizzard, Inc.’s (ATVI) expansion in China in collaboration with Tencent Holdings Limited and U.S. game developer Kabam, Inc.’s acquisition of TapZen and Magic Pixel Games. Other highlights include bidding for Nintendo Co. Ltd.’s (NTDOY) vintage video game from the 1980s and lucky winners hitting the jackpot on International Game Technology’s (IGT) Wheel of Fortune Video Slot.
Top Stories Over the Last Week
1. Activision Blizzard, in collaboration China-based Internet services provider Tencent Holdings Limited, launched its hit game Call of Duty Online in China. The game, inspired by the critically acclaimed Call of Duty: Modern Warfare and Call of Duty: Black Ops Universes, offers a unique gaming experience. We believe that Activision’s latest collaboration will expand its business beyond the home turf, leading to financial synergies.
2. As the video gaming business gains traction with the expansion in Internet services, many new entrants are coming into the limelight such as Kabam. The free-to-play game developer, which operates globally, acquired Los Angeles-based game developers, TapZen and Magic Pixel Games. The deal represents Kabam’s ninth studio acquisition since 2010, which indicates its strategy of rapid expansion to establish itself in the video game industry.
3. Another video game retailer, GameStop (GME), registered significant market share gains according to its holiday sales report. On Jan 13, the company reported holiday sales results for the nine-week period ended Jan 3. The company gained 10.5% on Jan 13 backed by a 94% surge in PS4 and Xbox One software sales mainly driven by games like Activision’s Call of Duty: Advanced Warfare, Grand Theft Auto V and Far Cry 4. However, total global sales for the holiday period declined 6.7%.
4. Leading game developer Nintendo is creating a buzz for its video game from the 1980s. This game — Stadium Events — was originally a Japanese video game developed by Bandai Companyin 1987. A factory-sealed unit of the video game — the rarest in the world — received the highest bid of $99,850, representing its demand among video game lovers.
5. International Game Technology once again made headlines with the payment of $1 Million-plus Jackpot in three months to two Wheel of Fortune Video Slot players at luxury resort hotel, The Venetian, at Las Vegas. Wheel of Fortune Video Slot — the company’s flagship product — strengthens its position in the casino game market with the payment of mega jackpots, in our view.
Performance
The following table shows the price movements of the major video game companies over both the past five trading days as well as the last six months:
|
Company |
Last 5 Days |
Last 6 Months |
|
ATVI |
-1.85% |
-16.92% |
|
EA |
-1.83% |
31.32% |
|
GLUU |
-11.11% |
-41.76% |
|
MSFT |
-3.62% |
12.57% |
|
NTES |
3.01% |
33.10% |
|
TTWO |
-0.61% |
24.87% |
|
ZNGA |
-1.15% |
-15.48% |
Over the last 5 days, NetEase, Inc. (NTES) remained the only gainer with a 3% rise. The company that lost the most over this time frame is Glu Mobile, Inc. (GLUU) with an 11% decline.
Over the six-month period, Net Ease gained the maximum — nearly 31.7%. We believe that the company’s exemplary performance across business segments and upgrade by JPMorgan Chase & Co. from a neutral to an overweight rating raised its market value. In addition, the expected positive impact of China’s interest rate cuts on the company given its high exposure in the Far East remains a significant growth catalyst. On the other hand, the stock that lost the most over this time period is Activision with a 17% price drop.
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