5 Gaming Stocks to Watch After NPD Group Report

An NPD Group report on the sales of physical goods in the video game industry sent gaming stocks into negative territory early in the day. However, major retailers and producers recovered by the afternoon, likely because investors felt the negative news from the report was already priced in. NPD reports that year-over-year hardware sales fell 27 percent in 2012 to a total of $4.04 billion.

NPD Group doesn’t track digital sales, meaning that the losses indicated by the report fall squarely on largely brick-and-mortar game retailers like GameStop (NYSE:GME). The report catalyzed some steep selling pressure early in the morning before investors seemed to decide that all the bad news was priced in earlier in the week.

Start 2013 better than ever by saving time and making money with your Limited Time Offer for our highly-acclaimed Stock Picker Newsletter. Get our fresh Feature Stock Pick now!

Shares of GameStop fell victim to the Grinch when it reported a 4.6 percent drop in total sales for the nine-week period ended December 29, and a 4.4 percent drop in total comparable store sales for the same period.

Gamestop Corporation Common Sto Stock Chart - GME Interactive Chart - Yahoo! Finance

Electronic Arts (NASDAQ:EA)

Shares of Electronic Arts, a major game publisher, opened significantly lower before quickly making a recovery. The NPD report said that software sales for 2012 fell 23 percent, from $8.69 billion to $6.71 billion. At a glance, this is a scary decline, and anybody with a head on their shoulders would reasonably fear for game publishers’ revenues.

But the woes of the gaming industry have been under scrutiny for a while. Gaming stocks across the board came down substantially in 2012 — Electronic Arts has fallen 27 percent over the last 52 weeks — and long-term industry observers were not surprised by the figures.

Electronic Arts Inc. Stock Chart - EA Interactive Chart - Yahoo! Finance

Activision Blizzard (NASDAQ:ATVI)

Even Activision Blizzard, arguably the most successful game publisher in the industry, traded lower early in the day. However, shares quickly recovered for much the same reason shares of Electronic Arts bounced back.

What’s interesting here, and is evident in the day’s stock movement, is that just after 1:00 p.m., a note from the Cowen Group hit the wires and Activision headed for over 5 percent gains. The note suggests that the company’s fundamental positioning remains strong, and that it has a compelling release schedule for 2013 that will serve as a catalyst for growth. Cowen has an “Outperform” rating on the stock.

Activision Blizzard, Inc Stock Chart - ATVI Interactive Chart - Yahoo! Finance

Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE)

Video Game Controller XboxThe NPD report also included some information about game console sales. Annual data was not available, but the the report indicated that December sales for Microsoft’s Xbox 360 fell 17.6 percent to 1.4 million units. Sony’s PlayStation 3 is expected to have sold less than 700,000 units.

Once again, taken at a glance this like bad news for revenues, but these sales figures aren’t a surprise to industry watchers. The current generation of gaming consoles is old. Sales have been slowing for some time. The Xbox 360 and PlayStation 3 are coming to the end of their lives, and consumers know this. Why blow your Christmas cash on a piece of technology that will be obsolete in a year?

Curiously, Microsoft’s stock followed a similar pattern to gaming stocks on Friday, but it was unlikely moved by the NPD report.

Microsoft Corporation Stock Chart - MSFT Interactive Chart - Yahoo! Finance

Investing Insights: Is United Technologies a Buy Now?