Videogame Stock Roundup: GameStop's Q2, Sony's New PS4 & More

Yesterday, video game retailer, GameStop Corp (NYSE:GME) reported second-quarter fiscal 2016 results wherein revenues missed the Zacks Consensus Estimate by a mile due to weak sales of new gaming software and hardware, sending the stock price down 8% in aftermarket trading. Further, media reports stated Sony Corp. (NYSE:SNE) plans to release a new, slimmer version of its base-model PlayStation 4 console next month, in addition to the new high-end model it announced earlier.

A Recap of the Developments

1. GameStop reported second-quarter 2016 adjusted earnings per share of 27 cents in the quarter that beat the Zacks Consensus Estimate by a penny, but declined 12.9% year over year.GameStop’s revenues fell 7.4% year over year to $1,631.8 million and also missed the Zacks Consensus Estimate of $1,722 million. The second-quarter results were hurt by a sharp decline in comparable store sales (comps), which were primarily affected by a fall in video games and hardware sales. Management reiterated its fiscal 2016 earnings guidance.

2. Per The Wall Street Journal Report, in Sep 2016 Sony could be announcing a sleeker version of PS4 in addition to the high end model it has already announced. However the slimmer version isn’t a surprise, because Sony has released such versions of the console’s previous iterations in the past. But, Sony’s decision to release a new base-model alongside a high-end model of the PS4 is a big surprise because the company’s typical console release schedule traditionally supports only one version at a time.

3. Nintendo, fresh from the success of Pokémon Go, has offloaded a part of its share in First Avenue Entertainment LLLP for $661 million. First Avenue operates Seattle Mariners Major League Baseball Team. The company had first announced its decision to sale a part of its stake in First Avenue in Apr 2016. Per media reports, the company’s decision apparently came after Nintendo’s president Satoru Iwata, who oversaw team operations passed away last year. However, it can’t be denied that since the company is struggling with sales of Wii U, it will try to “unlock more cash wherever it can” the report further added.

4. Electronic Arts (NASDAQ:EA) released the much awaited Madden NFL 17 on Aug 23. The game has an average metacritic rating of 83.5. Per media reports, research firm, Piper Jaffray estimates sales to touch 5.5 million units, flat year over year. However, the analyst added that the estimate could prove to be conservative. The company has a solid pipelineof releases (FIFA 17; Battlefield 1 a new Titanfall game) this year to cash in on the holiday season shopping frenzy. Also, EA and Dice announced Battlefield Premium Pass. It is a new membership program, which will give 14 days early access to the four upcoming Battlefield 1 digital expansion packs beginning with Battlefield 1 They Shall Not Pass in Mar 2017.

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, Glu Mobile (NASDAQ:GLUU) was up 5.56% while Zynga Inc. ZNGA was down 0.38%.

Over the last 6-month period, NetEase Inc. (NASDAQ:NTES) surged the most — nearly 53.04%. NetEase recently reported strong second-quarter 2016 results. Increasing popularity of mobile-based games and strength of PC games (licensed & self-developed) continue to keep investors interested in the stock. Moreover, growing mobile advertising revenues is an added incentive.

Glu Mobile was down 41.84% over the same time frame due to underperformance of most of its releases. Also, the company downgraded its outlook for 2016. But its significant share repurchase authorization and the much anticipated Taylor Swift game keep hopes alive.