Videogame Stock Roundup: Nintendo-Apple Collaboration, Sony's New PS4 & More

In a surprising development, Nintendo Co (T:7974). Ltd (OTC:NTDOY) collaborated with Apple Inc. (NASDAQ:AAPL) to bring its iconic character Mario the Plumber on the iOS platform in a new game titled Super Mario Run. Shares surged 29% in response. Further, Sony Corp. (NYSE:SNE) unveiled two new versions of PS4 while Activision Blizzard Inc.’s (NASDAQ:ATVI) Call of Duty XP event pushed the stock to reach an all time high of $43.10.

A Recap of the Developments

1.Many would not have anticipated what happened at Apple’s Keynote addressheld on Sep 7, 2016. Nintendo inventor Shigeru Miyamoto joined Apple CEO Tim Cook after he talked at length about the App Store, which grew over 106% in the last two months. Miyamoto announced the launch of a new Mario game, Super Mario Run, for the iOS platform by the end of this year.

Moreover, Niantic, the maker of Pokémon Go in association with Nintendo owned The Pokémon Company, announced that Pokémon Go will make its debut on Apple Watch soon. The unprecedented collaboration led the Nintendo stock to close 29% higher at the end of the trading session that day.

The year has been a good one so far for Nintendo, which is basking in the success of Pokémon Go. Shares of this Zacks Rank #3 (Hold) stock are up over 96% year to date. Though the success of the game doesn’t directly benefit Nintendo’s financials, we believe that it has strengthened the Japanese video game publisher’s position in the lucrative mobile games space, which should help it to sustain the momentum going ahead.

Nintendo had so far remained aloof from mobile games. Nintendo finally warmed to the idea of mobile games last year and struck a deal with DeNA to bring five mobile games by Mar 2017. With Miitomo, released by Nintendo earlier this year,it has two more games lined up for release this year namely, Animal Crossing and Fire Emblem.

2. Sony has launched two new versions of PS4 in a bid to maintain a competitive edge in the video games console market. It also revealed its plans to unveil a more powerful version of the flagship console this fall.

The newly launched PS4 Pro, an upgraded version of the 3-year-old PS4 hardware, now boasts a more powerful central and graphics processing chip and enhanced image-processing capability. It offers additional storage and supports 4K resolution. PS4 is designed to support Sony's PlayStation VR virtual reality headset. Sony also unveiled a sleeker and more energy-efficient PS4 to replace the original fourth-generation PlayStation machine.

Sony is facing troubles in a number of its business segments, it has been leveraging its games business that has consistently performed well on robust sales of consoles. In the fiscal year ending Mar 2017, the company anticipates its gaming business to generate about 45% of its overall operating profit. The stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3. Activision’s Call of Duty XP event was held in California over the last weekend. Players from across the world participated in the event to play and compete in the Call of Duty World League Championship and even live stream their games on Facebook (NASDAQ:FB) . The event will likely spark interest in Call of Duty: Infinite Warfare and the Call of Duty: Modern Warfare Remastered, which are scheduled to be launched on Nov 4, 2016.

Apart from Call of Duty, e-sports was another focal point of the event. E-sports is gaining traction and Activision, which holds a Zacks Rank#2 (Buy) is leaving no stone unturned to grab a lucrative share of this market. As per a Newzoo report, global revenues from e-sports are expected to top $1 billion by 2019.

Activision had acquired Major Gaming League earlier this year to boost its prospects in the space. It recently named Fox Sports executive Pete Vlastelica as co-president and CEO of its e-sports unit.

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, Zynga (NASDAQ:ZNGA) was up 5.95% while Microsoft (NASDAQ:MSFT) was down 1.03%.

Over the last six-month period, NetEase Inc. (NASDAQ:NTES) surged the most — nearly 61.01%. NetEase recently reported strong second-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, growing mobile advertising revenues wasan added incentive.

Glu Mobile (NASDAQ:GLUU) was down 22.23% over the same time frame due to the underperformance of most of its releases. Also, the company downgraded its guidance for 2016. But its significant share repurchase authorization and the much anticipated Taylor Swift game keep hopes alive.

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