Here are the Key Events Video Game Investors Must Know Now
The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
This newsletter lists the key events (including key game releases and financial news) in February, previews our expectations for March, and provides our views of the current state of the video game industry.
In February, Activision Blizzard (NASDAQ:ATVI), Take-Two (NASDAQ:TTWO), Ubisoft (EPA:UBI) sales only, and Zynga (NASDAQ:ZNGA) reported better-than-expected quarterly results. In addition, Sony reported quarterly results.
The Wedbush Video Game Index—our market cap-weighted index of video game companies—was up 12% in February, and significantly outperformed the broader market averages due to the introduction of the Sony PlayStation 4, a string of strong quarterly results, and some speculation about a potential Activision Blizzard recapitalization. The Russell 2000 and the S&P 500 were both up 1% for the month as positive momentum from strong corporate results and increased M&A activity was offset by sequestration fears. Among the covered publishers, Activision Blizzard had the strongest month (up 25%) after reporting better-than-expected quarterly results and mentioning in its earnings press release that a number of financial transactions were being considered in 2013. Take-Two (up 20%) and Ubisoft (up 18%) also benefitted from strong results and the new console. Majesco (NASDAQ:COOL) was the only covered publisher that declined in February, down 14% from concerns around the company’s dependence on the Zumba Fitness games. On a constant f/x basis, the index increased 10%. Excluding Nintendo (TYO:7974), the index increased 19% (on a constant f/x basis as well).
January U.S. console software sales were $373 million, up 1% from last year’s sales and our estimate of $370 million. The small sales increase was due to an extra week in the measurement period this year, so sales actually comped down on a like-for-like basis. Software sales growth In the Xbox 360 and PS3 offset the combined decline In Nintendo devices despite the November introduction of the Wii U, with the weak PS Vita netting out the PSP decline and accounting for the overall growth. Software units were down 2%, with ASPs up 3%. PC software sales were down 20% largely due to EA’s (NASDAQ:EA) Star Wars: The Old Republic last year. Hardware sales were $205 million, up 4% compared with last year’s $198 million, and above our estimate of $178 million largely due to the performances of Xbox 360 and PS3, which more than offset the disappointing Wii U. Combined hardware and software (including PC) sales for January were up 1% y-o-y.
We expect February console software sales to be…
led by new releases EA’s Crysis 3 (360, PS3, PC) and Dead Space 3 (360, PS3, PC) and Konami’s Metal Gear Rising: Revengeance (360, PS3), as well as Activision Blizzard’s Call of Duty: Black Ops II. We expect console software sales to show positive growth for the second consecutive month due to a series of new releases and a manageable comparison (down 20%).
Key February headlines:
o 2/5 – Take-Two reported better-than-expected Q3:13 results, but did not fully pass through the beat to FY guidance.
o 2/5 – Zynga reported better-than-expected Q4:12 results, but provided Q1:13 guidance below our expectations.
o 2/6-7 – D.I.C.E. Summit held at the Hard Rock Hotel & Casino in Las Vegas.
o 2/7 – Sony reported Q3:12 results.
o 2/7 – Ubisoft reported better-than-expected Q3:13 sales and narrowed FY:13 guidance.
o 2/7 – Activision Blizzard reported better-than-expected Q4:12 results and provided conservative FY:13 guidance.
o 2/14 – NPD reported console software sales for the month of January that were roughly in line with our expectations.
o 2/18 – Activision Blizzard officially unveiled Destiny, a first-person action game from developer Bungie.
o 2/20 – Sony officially unveiled its next console, PlayStation 4 (or “PS4”), at an event in New York City.
o 2/21 – Nevada Governor Brian Sandoval signed legislation legalizing intrastate online gambling.
o 2/26 – New Jersey Governor Chris Christie signed legislation legalizing intrastate online gambling.
Key March events:
o 3/11 (est.) – Majesco Entertainment to report Q1:13 results. ⇓ COOL
o 3/14 – February NPD U.S. video games sales data release.
o 3/21 (est.) – GameStop (NYSE:GME) to report Q4:12 results. ⇑ GME
o 3/26 – Take-Two to release BioShock Infinite (360, PS3, PC). ⇑ TTWO
Michael Pachter is an analyst at Wedbush Securities.
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