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Videogame Stock Roundup: NPD Posts Numbers for August; Nintendo Pokemon Go Accessory Launch in Focus

Zacks

Among top stories this week, research firm NPD reported video games sales data for the month of August. Basking in the success of Pokémon Go, Nintendo NTDOY now looks to benefit from the launch of associated accessory. Among other developments, NetEase NTES is reportedly divesting its news unit while Activision Blizzard ATVI announced the pricing of senior notes.

A Recap of the Developments

1. As per a VentureBeat report, The NPD Group issued video game sales numbers for the month of August. As per NPD, sales of new game-related products grew 1% to $573.4 million driven by Xbox One Sand new game releases from Electronic Arts and Square Enix. Hardware sales are down 6% to $178.1 million whereas console software sales increased 8% to $273.7 million.

Sales of Microsoft’s MSFT Xbox One beat the likes of Sony’s PS4 and Nintendo’s 3DS. Release of Xbox One S caused a 37% jump in unit sales and for 3DS, unit spending was up 83% driven by the Pokémon Go craze. However, higher sales of Xbox One S and 3DS couldn’t offset the fall in sales of PS4 and other older consoles, resulting in an overall decline for the segment.


On the other hand, console software sales grew mainly driven by releases of titles like Madden NFL, No Man’s Sky and Deus Ex. However, Madden 17, despite being the highest selling title saw its sales fall 3% compared with NFL 16 released in Aug 2015. Take Two Interactive’s TTWO Grand Auto Theft V and Activision Blizzard’s Overwatch occupied the fourth and fifth spots on the list of highest selling titles for the months. PC game software grew 18% to $14.2 million year over year.

The sale of accessories also fell 5% year over year to $107 million. An increase of 10% in interactive gaming toys accessory spending was not enough to battle the 6% decline in sales for gamecards and gamepads and another 3% decline in sale of headsets/headphones. New white Xbox One S Controller was the highest selling gamepad with over 79,000 units sold.

2. Nintendo will be launching a new accessory today for Pokémon Go called Pokémon Go Plus. Prized at $35, the accessory will help to count steps even if the game app is running in the background on the phone. At present, if a user switches to a different tab while playing the game, he is not “accruing the vital walking distance needed to power up Pokémon”. A Business Insider report quoted Niantic CEO saying “the point of Pokémon Go is to encourage people to explore the real world and make friends. Removing the need to pay attention to your phone's screen to play the most tedious parts of the game seems like a big step toward that goal — which is also why the game is coming to the Apple Watch, too”. Pokémon Go has become a worldwide craze since its release. The game has earned over $440 million in less than two months of its release. Nintendo carries a Zacks Rank#3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3. Activision Blizzard announced the pricing of senior unsecured notes aggregating $1.5 billion in a private offering. These bonds have been issued in two tranches of different amounts with varying coupon rates and maturity dates. The offering is expected to be closed on Sep 19, 2016. The $650 million and $850 million senior notes have an annualized interest rate of 2.300% and 3.400%, respectively. The notes due to mature in 2021 and 2026 will be priced at a respective 99.878% and 99.614% of their principal amounts. At present, Activision carries a Zacks Rank #2 (Buy).

4. Chinese media firm, NetEase Inc is reportedly selling its news unit to raise about $300 million. The proceeds will be used to boost its core operations i.e. its online gaming business. NetEase carries a Zacks Rank #1.

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

4.18%

37.28%

EA

-0.11%

26.86%

GLUU

–4.74%

-27.54%

MSFT

-0.83%

6.72%

NTES

10.63%

62.53%

TTWO

1.19%

28.24%

ZNGA

7.35%

31.53%

Over the last five trading sessions, NetEase was up 10.63% while Glu Mobile GLUU was down 4.74%.

Over the last six-month period, NetEase Inc surged the most — nearly 62.53%. NetEase has been in the news as it was widely anticipated that the Chinese gaming company will divest its news unit to focus on its gaming business. Plus, recently the company 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 were an added incentive.

Computer and Technology Sector Price Index

Computer and Technology Sector Price Index

Glu Mobile was down 27.54% 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. It recently purchased Poke Radar. Poke Radar is a community app built by Pokémon Go fans.

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