Over the last five trading sessions, Video Game stocks mostly witnessed a mixed trend. While NetEase, Inc. (NTES) and Electronic Arts (EA) gained momentum, Glu Mobile, Inc. (GLUU) and Zynga, Inc. (ZNGA) tumbled.
Some of the major stories that grabbed headlines over the past week were the launch of Call of Duty: Advanced Warfare by Activision Blizzard, Inc. (ATVI) and appointment of Chief Operating Officer at Perfect World Co., Ltd. (PWRD). Further, litigations against Electronic Arts and Chinese social messaging app, Momo Inc., made headlines.
Top Stories Over the Last Week
1. Activision recently announced hosting a Call of Duty: Advanced Warfare competition among 32 of the best Call of Duty teams from around the world. The company, in collaboration with Xbox, Major League Gaming (MLG) and other international eSports partners for the tournament, is offering $1 million in prize money to the winning team. Players need to register for online tournaments played on Xbox One in order to qualify.
2. Electronic Arts has been sued by Ex-National Football League players for using their modes in the Madden NFL series without permission or proper compensation. The company has recreated the league’s best moments by featuring some of the legendry NFL players in the video game without their permission. While Electronic Arts has been defending itself on grounds of incidental use and free speech, going by the current scenario the company may have to face hefty charges.
3. China’s leading Game developer Perfect World appointed its new Chief Operating Officer, Yunfan Zhang. Previously, Zhang served as the vice president and later senior vice president of the company. Having worked with popular gaming companies like NetEase, Zhang’s expertise is expected to propel the company to new heights. The company’s stock price is currently trending upward following Chairman Michael Yufeng Chi’s proposal to acquire Perfect World for $20.00 per American Depositary Share (ADS).
4. Following the merger between Bally Technologies and Scientific Games, the former provided important financial information on pre-merger operating performance so as to facilitate internal financial forecasts for fiscal 2015 and 2016. Bally Technologies offered details on its adjusted EBITDA and unlevered free cash flow to Scientific Games considering it crucial for evaluating its potential operating performance before the deal closes.
5. Last month, NetEase accused Momo’s CEO and co-founder Tang Yan of dubious business practices like intellectual property theft and violation of business contracts. Following NetEase’s accusation, the Chinese mobile chat app firm announced that it will contest the allegations. While Momo shares surged 13% following this announcement, the company has shown concern regarding the impact of such litigations on the overall image of the company.
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 |
-4.37% |
-9.77% |
|
EA |
2.69% |
32.81% |
|
GLUU |
-5.43% |
-20.59% |
|
MSFT |
1.78% |
13.33% |
|
NTES |
4.37% |
31.45% |
|
TTWO |
1.28% |
26.86% |
|
ZNGA |
-5.49% |
5.81% |
Over the last 5 days, NetEase remained the top gainer with 4.4% stock price rise, which in our view, may largely be attributed to the latest feud between NetEase and Momo. Given the current scenario, if Momo remains unsuccessful in defending itself, NetEase can fine the company heavily and generate significant cash flow going forward.
On the other hand, the company that lost the most over the same time frame was Zynga, declining almost 5.5%. Notably, the company lost the most among the gaming stocks in 2014, declining 37.7% in the last year. Once known as the power house in social gaming, Zynga’s success remained short lived with the changing scenario of the video gaming industry. With the onslaught of mobile gaming, investors are concerned about the company’s prospects as it continues to lag.
Over the six-month period, however, Electronic Arts gained the most — nearly 32.8%. We believe that the company’s exemplary performance across business segments contributed to its rising market value. On the other hand, the stock that lost the most over the same time period was Glu Mobile with a 20.6% price drop.
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