Videogame Stock Roundup: Nintendo's Pokemon Sun & Moon Shatter Records, ATVI CEO Gets New Compensation Deal

Japanese video game giant, Nintendo Co (T:7974) Ltd (OTC:NTDOY) has had a good year so far. After Pokémon Go’s super success, its latest games, Pokémon Sun and Moon have become the “fastest selling games” ever in the Americas. This bodes well especially as we approach the holiday season. Plus, fans across the globe can now enjoy Nintendo games inspired theme areas at four Universal Studios locations. Meanwhile, Activision Blizzard (NASDAQ:ATVI) chalked out an impressive package for CEO Bobby Kotick, which could reportedly make him one of the “highest paid CEOs” in the U.S.

Recap of the Developments

1. In a press release a couple of days back, Nintendo said that Pokémon Sun and Pokémon Moon for Nintendo 3DS, (already the most pre-ordered games ever for the company) have now become the “fastest selling games” in the Americas with over 3.7 million units sold in less than a fortnight.

The earlier record was held by Pokémon X and Pokémon Y games, which released in 2013. The Pokémon Go craze has definitely given these new 3DS game a little more boost. These games carry a score of 87% on Metacritic. At its last earnings release (for the six months ended Sep 30, 2016), management noted that the enthusiasm surrounding Pokémon Go also helped sales of its 3DS console.

The Pokémon franchise has been a monster hit for Nintendo. Per Nintendo, sales of Pokémon-related software topped the 280 million units mark as of May 2016, globally, since it was launched alongside Pokémon Red and Pokémon Blue games in 1996.In fact, Nintendo’s Mario and Pokémon are widely recognized as the most successful video game franchises in the world.

This year has been a pretty good one for the company with shares surging over 75.5% year to date compared with the Zacks Toys/Games/Hobby Products Industry gain of 9.01%. Going ahead, we believe the launch of new games like Super Mario Maker for 3DS and Super Mario Run for iOS should help it continue the momentum. Also, there are a lot of expectations from the recently revamped NES as well as the upcoming launch of the Switch console. 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.

2. Nintendo also announced updates to its Comcast (NASDAQ:CMCSA) agreement signed way back in May 2015. Per the agreement, Universal Studios and Parks, a unit of Comcast’s NBC Universal, will come up with Nintendo games inspired theme areas at four locations including one at Universal Studios in Osaka, Japan. The expansion will bring the much loved characters like Mario and Zelda, along with the action and adventures of Nintendo games to life with a little extra touch of ingenuity. Meanwhile, reportedly, Electronic Arts (NASDAQ:EA) , at the Credit Suisse (SIX:CSGN) 2016 Annual Technology Conference, hinted that it will be bringing a big game title for Nintendo’s Switch, set to release in Mar 2017.

3. Activision Blizzard has dished out an impressive new compensation package for its CEO Bobby Kotick. Though it includes a reduction in base pay to $1.8 million from $2.4 million from Jan 2017, his performance related bonus will now be 200% of his base pay if he achieves “certain” targets. As per media reports, the figure will top $56 million, which will catapult Kotick into the league of the highest paid CEOs in the U.S. Activision has been doing very good in the past two years under Kotick. He, in fact, has been at the helm for 25 years now. In the past two years, Activision has been taking giant strides, which has well reflected in its share price. Shares of Activision have registered impressive return of 65.7% over the past two years compared with the Zacks Toys/Games/Hobby Products Industry gain of 49.8%.

Apart from a full-fledged video game publishing business, the company has been exploring newer avenues like e-sports and movies. In 2015, it announced the acquisition of Ireland-based King Digital Entertainment, which has made it a big player in the mobile games space where so far the company had limited presence. After the King Digital buyout, there is heightened speculation that Activision will now make “smaller, bolt on” acquisitions as per media reports. At present, Activision carries a Zacks Rank #2 (Buy).

Computer and Technology Sector Price Index

Computer and Technology Sector Price Index

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, Activision was down 7.32% while Zynga Inc (NASDAQ:ZNGA) was up 2.50%.

Over the last six-month period, NetEase (NASDAQ:NTES) surged the most (23.65%). Recently, NetEase reported solid third-quarter 2016 results. 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, higher mobile advertising revenues were an added incentive. NetEase has announced a new $1 billion buyback program for its ADRs over a one-year time frame. The development comes close on the heels of NetEase launching its first VR game, Twilight Pioneers on Google’s VR platform, Daydream.

Glu Mobile (NASDAQ:GLUU) was down 8.47% 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.

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

Where Do Zacks' Investment Ideas Come From?

You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>