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Videogame Stock Roundup: TTWO, GME Report Earnings, Microsoft Renames Beam to Mixer

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The earnings season is almost over, with the majority of the companies having reported results. Last week, we had Take Two Interactive Software (TTWO - Free Report) and GameStop (GME - Free Report) reporting their results. Take Two also announced that it was pushing the release of its much-anticipated Red Dead Redemption 2 from fall of 2017 to spring of 2018.

Meanwhile, Microsoft Corp (MSFT - Free Report) has changed the name of its live-streaming service from Beam to Mixer and has also added a plethora of new features.

Recap of the Developments

1.    Earnings

Take Two Interactive: Take Two reported fourth-quarter fiscal 2017 results, wherein GAAP earnings were 89 cents per share compared with the prior-year quarter’s earnings of 48 cents. Adjusted earnings came in at 65 cents per share. The Zacks Consensus Estimate was pegged at 47 cents.

Net revenues (excluding deferred revenues) were $407.1 million, up 7.93% year over year. It also beat the Zacks Consensus Estimate of $359.1 million. Continued increase in digital revenues and strength in games like Grand Theft Auto V, Grand Theft Auto OnlineNBA 2K17WWE 2K17, Mafia III, and Sid Meier’s Civilization VI were the driving factors.

Just a day prior to its earnings release, Take Two announced that the release of its much-anticipated game, Red Dead Redemption 2 will be delayed from fall of 2017 to spring of 2018.The delay has sent investors into a tizzy as Red Dead Redemption 2 was expected to emerge as one of the company’s biggest revenue-generating games of the year. The company stated “We are very sorry for any disappointment this delay causes, but we are firm believers in delivering a game only when it is ready. We are really excited to bring you more details about the game this summer.”

Currently, Take Two carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the last one year, Take Two has returned 103.18% compared with the Zacks Toys/Games/Hobby/ Product industry’s gain of 37.40%.

GameStop Corp:  GameStop’s first-quarter fiscal 2017 adjusted earnings of 63 cents per share comfortably beat the Zacks Consensus Estimate of 49 cents but declined 3 cents from the year-ago quarter. Net sales were up3.8% year over year to $2,045.9 million and surpassed the Zacks Consensus Estimate of $1,890 million.

The company’s better-than-expected results in the reported quarter came on the back of robust international sales along with steep increase in net hardware sales on account of strong sales of Nintendo Switch as well as Collectibles. Sharp increase in Technology Brands sales also drove the results higher.

GameStop continues to expect fiscal 2017 comps to be in the range of flat to down 5%. For the fiscal year, management also reiterated earnings outlook and continues to project in the range of $3.10–$3.40 per share.

GameStop currently carries a Zacks Rank #4 (Sell).In the past one year, the stock has declined 25.98% compared with the Zacks categorized Retail-Consumer Electronic industry’s increase of 61.52%.

2. Microsoft has overhauled its live streaming service, Beam and renamed it Mixer to compete effectively against Amazon’s Twitch and Google’s YouTube gaming. Per Microsoft, the name change was necessary. In a blog post, representatives for Mixer said “We believe so much in the power of the platform and want to grow it in every major market around the world. Unfortunately, that wasn’t something we could do with the Beam name. We chose Mixer as our new name because it represents what we love most about the service….how it brings people together.”

Per the blog, Mixer will now boast of co-streaming which will allow several channel streams to be displayed on a single page. It also launches a new mobile app (beta version) which will allow users to “self-broadcast.” The company added that it will soon add in the ability to live stream gameplay from mobile phones. Mixer also boasts other features like Channel One, to know what’s happening across the live-streaming service.

Last year, in order to up its ante in the video games space, Microsoft purchased Beam for an undisclosed amount. Beam focuses on live-streaming technology for gamers. It allows viewers to introduce new elements into the game. Back then, Microsoft had said “You can give (players) new challenges and make real-time choices that affect their gameplay, from tool selection to quests to movement; all through simple visual controls.”

At present, Microsoft carries a Zacks Rank #3. We also note that Microsoft’s yearly return of 34.21% is much better than the Zacks categorized Computer-SoftwareIndustry’s gain of 28.72%.

3. Meanwhile, Changyou.com Ltd. , a subsidiary of Chinese gaming company, Sohu.com Inc. SOHU, announced that it had received an offer from its chairman, Charles Zhang to take the company private. He has made an offer to acquire all the shares of the company (both A & B class) at $21.05 per share. Two Class A share constitute one American Depositary share (ADS) of the company. The offer price, for ADS, it is $42.10, represents just a 9% premium to the closing ADS price on May 19, 2017.

At present, Changyou.com carries a Zacks Rank #2. We also note that Changyou.com’s yearly return of 105.09% is much better than the Zacks categorized Internet Content Industry’s gain of 44.60%.

Performance

The following table shows the price movement of the major video game companies over the past five trading days as well as the last six months:

Company

Last 5 Days

Last 6 Months

ATVI

5.73%

59.11%

EA

4.35%

43.78%

GLUU

-1.87%

17.94%

MSFT

1.81%

15.02%

NTES

8.15%

29.20%

TTWO

15.52%

60.89%

ZNGA

5.12%

21.18%

 

 

 

 

 

 

 

 

 

 

 

 

 

Over the last five trading sessions, Take Two Interactive was up 15.52%, while Glu Mobile Inc was down 1.87%.

In the last six-month period, Take Two Interactive surged the most (60.89%). The company continues to benefit from its popular offerings like Grand Theft 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. Take Two continues to expect growth in digital revenues, driven by higher sales of full-game downloads and increase in recurrent consumer spending.

Computer and Technology Sector 5 YR % Return

Computer and Technology Sector 5YR % Return

The company recently forayed into the free-to-play games space with the acquisition of game developer, Social Point. The acquisition will help it boost its performance, going ahead. Take Two also inked a partnership with NBA to launch NBA 2K eLeague, making it the “first eSports league operated by a U.S. professional sports league.” The NBA 2K league will be functional in 2018.

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