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Videogame Stock Roundup: Microsoft's (MSFT) Earnings, Nintendo's New Console

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The third-quarter earnings reporting cycle has begun. Yesterday, we had results from Xbox One maker, Microsoft Corp (MSFT - Free Report) . Apart from Microsoft’s earnings, Nintendo’s (NTDOY - Free Report) Switch was also in the limelight.

Recap of the Developments

1.  Microsoft Earnings: Microsoft’s first quarter fiscal 2017 adjusted earnings of 76 cents and revenues $22.33 billion easily beat the Zacks Consensus Estimate. Though gaming is a very small part of the company’s business, Xbox is an important aspect of the overall video game industry. Microsoft’s gaming revenues fell 4% in constant currency. But, Xbox Live monthly active users grew 21% to 47 million.

2.  After the blockbuster success of Pokémon Go, Nintendo recently launched a new videogame console named Switch. Nintendo has remained tight-lipped about Switch, earlier codenamed NX, for a long time and had revealed minimum details. Yesterday, the Japanese giant provided a 3-minute long video of Switch, which combines the functionalities of both conventional consoles and handheld devices. It will be available from Mar 2017 but the company refrained from providing details on the price tag.

Most analysts remain on the sidelines following the video trailer. Analysts observe that Nintendo needs a hit in the form of Switch, following the debacle of its last console Wii U. But the apparent lack of any ground-breaking/differentiating features from the consoles that are available in the markets right now could cost Nintendo heavily. Nintendo carries a Zacks Rank #2 (Buy). 

3. Per media reports, Sony Corp is likely to up its ante in the mobile game space with the launch of as many as five games by Mar 2018.The games are likely to be based on the Japanese giant’s famous PlayStation franchises like The Last Guardian, I.Q.: Intelligent Qube and Hot Shots Golf. Reports further added that Sony plans to launch the games first in Japan on both iOS and Android platform through its subsidiary, ForwardWorks.

There aren’t any details available on the company’s international roll out of these games. As more and more people opt to play games on their smartphones and tablets, video game companies have started to see it as a lucrative opportunity to boost revenues.  As per digicap, revenues from the mobile games market will grow from $35 billion in 2016 to $48 billion by 2020. Sony carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance

The following table shows the price movement 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

0.91%

25.73%

EA

0.24%

25.41%

GLUU

-7.76%

-31.06%

MSFT

-0.95%

2.99%

NTES

4.57%

94.57%

TTWO

0.65%

22.36%

ZNGA

-1.02%

17.34%

 

 

 

 

 

 

 

 

 

 

 

 

 

Over the last five trading sessions, NetEase (NTES - Free Report) was up 4.57% while Glu Mobile was down 7.76%.

Over the last six-month period, NetEase surged the most (94.57%). NetEase has been in focus on reports that it will divest its news unit to focus on its gaming business. The increasing popularity of mobile-based games and the strength of PC games (licensed & self-developed) continue to keep investors interested in the stock. Moreover, growing mobile advertising revenues were an added incentive.

Glu Mobile was down 31.06% over the same time frame due to the underperformance of most of its releases. Also, the company lowered its guidance for 2016. But its significant share repurchase authorization and the much anticipated Taylor Swift game keep hopes alive. It recently purchased Poke Radar. Poke Radar is a community app built by Pokémon Go fans.

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