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Videogame Stock Roundup: Activision & Zynga Earnings; Take Two Partners NBA for E-sports League

Earnings releases were once again in focus this week. Apart from earnings, we had Take Two Interactive collaborating with NBA to launch a new e-sports league.

Recap of the Developments

1. Earnings:

Activision Blizzard Inc.ATVI : Activision's fourth-quarter 2016 adjusted earnings of 86 cents and revenues (including deferrals) of $2.452 easily beat the respective Zacks Consensus Estimate of 72 cents and $2.265 billion. On a year-over-year basis, revenues were up nearly 81%. Revenues were driven by increasing digital revenues, overwhelming success of Overwatch and buyout of King Digital Entertainment. However,the company's Call of Duty Infinite Warfare relatively underperformed compared to last year's Call of Duty: Black Ops 3. At the conference call, management said that it was "enthusiastic" to take Call of Duty "back to its roots".

The company also announced a new buyback program worth $1 billion to be executed over the next two-year time frame. Also, Activision hiked dividend by 15% to 30 cents a share, payable on May 10, 2017 to shareholders of record as of Mar 30. At present, Activision carries a Zacks Rank #3. Shares of Activision have registered impressive growth in the past one year. The stock generated a return of 44.61% compared with the Zacks Toys/Games/ Hobbies Product industry's gain of 25.81%.

Zynga IncZNGA : Zynga reported fourth-quarter 2016 loss per share of 4 cents that compared unfavourably with the Zacks Consensus Estimate of a loss of 3 cents. Revenues of $201.5 million beat the consensus mark of $191.9 million. Zynga's mobile daily active users (DAU) grew 5% year over year to 16 million. Zynga carries a Zacks Rank#3.

Glu Mobile Inc GLUU : Glu Mobile reported fourth-quarter 2016 loss per share of 13 cents compared with the Zacks Consensus Estimate of a loss of 10 cents and loss of 2 cents reported in the year-ago quarter. Revenues of $46.3 million also missed the consensus mark of $46.6 million and declined 24.1% year over year. Also, the company announced that it has inked a deal with MLB and Kris Bryant and many more for releasing a new title under its Tap Sports Baseball franchise. Glu Mobile carries Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Take-Two Interactive Software Inc. TTWO : Take Two reported third-quarter fiscal 2017 results wherein adjusted earnings of 71 cents per share beat the Zacks Consensus Estimate of 24 cents. Revenues grew over 15% year over year to $476.5 million driven by key offerings like Sid Meier's Civilization VI, NBA 2K17 and continued strength in Grand Theft Auto V and Grand Theft Auto Online games .The company provided guidance for the fourth quarter of fiscal 2017. Take Two expects non-GAAP revenues of $542 million to $592 million. GAAP earnings are expected to be in a range of $1.23 to$1.31 per share. Take-Two carries a Zacks Rank#3.

2. Meanwhile, Take Two also inked a partnership with NBA to launch NBA 2K eLeague, making it the "first eSports league operated by a U.S. professional sports league." The NBA 2K league will be functional in 2018.

E-sports refers to live video game tournaments. Like traditional sports, even these are held at stadiums and are televised or broadcast online. Importantly, these tournaments have alluring prize money. With continued increases in viewership, corporate sponsorships and growing media coverage, e-sports is here to stay. Per research firm Newzoo, it is estimated that revenues from e-sports will grow 43% year over year to $463 million in 2016 and jump to $1.1 billion by 2019.

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:

Company Last 5 Days Last 6 Months
ATVI 0.30% -3.68%
EA 0.12% 5.81%
GLUU -4.39% -1.36%
MSFT -2.61% 10.07%
NTES 1.85% 29.43%
TTWO 4.34% 35.35%
ZNGA -1.95% -8.36%

Over the last five trading sessions, Glu Mobile was down4.36% whereas Take Two was up 4.34%.

Over the last six-month period, Take Two surged the most (35.35%). The company continues to benefit from its popular offerings like GrandTheft Auto V and Grand Theft Auto Online (though sales are slowing down), along with its other releases like NBA 2K17.In fact, higher sales of the digital version of the games add to the company's margins. The company continues to expect growth in digital revenues driven by higher sale of full game downloads and increases in recurrent consumer spending. Take Two recently forayed into the free-to-play games space with the acquisition of game developer, Social Point. The acquisition will help it to boost its performance going ahead. Also, the company is well positioned to benefit from the highly anticipated launch of Read Dead Redemption 2 later this year.

Computer and Technology Sector 5YR % Return

Computer and Technology Sector 5YR % Return

Zynga was down 8.36% over the same time frame. Slowdown in its user growth remains a major concern. Moreover, a slowing web business along with intensifying competition isaconcern. However, its cost cutting initiatives are a positive. We expect itstop line to be driven by popular games like Words With Friends and Poker.

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Activision Blizzard, Inc (ATVI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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