Among the top stories this week, research firm NPD reported dismal video games sales data for the month of November. This caused widespread concern since November is generally one of the biggest months for video game companies given the holiday season shopping rush. Separately,  Nintendo Co. Ltd. (NTDOY Quick QuoteNTDOY - Free Report)  released its much anticipated iOS game, Super Mario Run this week.

Recap of the Developments

1. As per a VentureBeat report, The NPD Group issued video game sales numbers for the month of November. As per NPD, overall sales plunged 24% year over year to $1.97 billion. In fact, every category witnessed a record drop. Despite the release of Sony’s PlayStation 4 Pro and Nintendo’s NES Classic (sold 196K units), hardware sales fell 35% to $723.8 million. Declining sales of Xbox One and PS4 were the main reasons. Tougher year-over-year comparisons marred console software sales, which fell 18% to $955.2 million.

Per a NPD analyst, sales in the year-ago period benefited from the super success of Activision Blizzard’s Call of Duty; Black Ops 3, Electronic Arts’ (EA Quick QuoteEA - Free Report) Star Wars Battlefront and Bethesda’s Fallout 4. However, this year’s top three games, Call of Duty; Infinite Warfare, EA’s Battlefield 1 and Nintendo’s Pokémon Sun didn’t make that big an impact. In fact, sales of Infinite Warfare are reportedly down 50% from last year’s Black Ops 3 sales. Though nobody expected Infinite Warfare to outsell Black Ops 3 as the former is a relatively less recognized series, a 50% drop was unexpected.  Together, the sale of the top three titles was down 43% year over year in November.

Further, NPD adds that PC software tanked 28% to $27.5 million and accessories sale was down 6% to $259.8 million. A decrease of 49% in interactive gaming toys accessory spending was the main reason behind dismal accessory sales numbers. The launch of PS4 did not help accessory sales either. Sony DualShock 4 was the highest selling gamepad but sales of gamepads overall were down.

2. Nintendo is aggressively pushing into the mobile game space after remaining aloof so far. Nintendo’s much anticipated mobile game, Super Mario Run (SMR) for Apple’s AAPL iOS platform released yesterday for $9.99 across 151 countries. The company, reportedly, expects to release an Android version in 2017. The game is free to play for a few levels, following which gamers will have to shell out $10 to download the whole game.

Analysts differ in their opinions. Some analysts consider this a hefty price tag especially in “developing countries”. Also, the game requires an Internet connection. On the other hand, media reports quote another analyst who is bullish on the stock and expects nearly 40% jump in price. Per the analyst, SMR is Nintendo’s creation and so it stands to benefit from revenues entirely. This, however, was not the case for Pokémon Go. Pokémon Go was a super hit but had limited impact on Nintendo’s financials as it was created by Niantic in association with Nintendo. Consequently, most of the benefit was netted by Niantic. At present, Nintendo carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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:

Over the last five trading sessions, Take Two Interactive (TTWO Quick QuoteTTWO - Free Report) was up 6.32% while NetEase (NTES Quick QuoteNTES - Free Report) was down 3.29%.

Over the last six-month period, Take Two surged the most (34.52%). The company continues to benefit from its popular offerings like GrandTheft Auto V and Grand Theft Auto Online (though sales are slowing down), along with its other releases like NBA 2K17. In fact, higher sales of the digital version of the games add to the company’s margins. The company continues to expect growth in digital revenues driven by higher sale of full game downloads and increases in recurrent consumer spending.

Glu Mobile was down 10.68% over the same time frame due to the underperformance of most of its releases. Its weak third-quarter results were somehow overshadowed by the announcement of a new CEO and acquisition of a majority stake in CrowdStar. 

Computer and Technology Sector 5YR % Return

Computer and Technology Sector 5YR % Return

Want to learn more about video game stocks? Make sure to check out our podcast below!

Now See Our Private Investment Ideas

While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>