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Videogame Stock Roundup: Nintendo’s Solid Switch Sales, EA’s Star Wars Battlefront 2 Out in November

Zacks

There were quite a few developments in the video game space last week. Per research firm, NPD Group, Nintendo’s NTDOY Switch sold 906K units in March alone. The company is now reportedly looking to launch a miniature version of its Super Nintendo Entertainment System (SNES), this holiday season. Moreover, players across the globe are set to rejoice as Electronic Arts EA announced that Star Wars Battlefront 2 will be out on Nov 17, 2017.

Recap of the Developments

1. Per NPD Group, Japanese giant, Nintendo’s latest console sold nearly 906K units in March, which is phenomenal, given the fact that most news games/ product launches are usually reserved for the holiday season to benefit from the gifting frenzy. Switch was launched on Mar 3, 2017. The Legend of Zelda: Breath of the Wild also boosted Switch sales. The game reportedly has sold some 925K units for Switch and 1.3 million units in total. Going ahead, there are many games like Mario Kart 8 Deluxe (April) and Super Mario (Nov-Dec 2017) that should boost Switch sales.

Switch, priced at $300, combines the functionalities of both conventional consoles and handheld devices. It is designed to attract casual gamers who are increasingly using mobile. After staying away from mobile gaming for long, Nintendo has started focusing highly on mobile games now. Last year’s smash hit Pokémon Go gave it the much needed impetus.


At present Nintendo carries a Zacks Rank #1 (Strong Buy).We note that Nintendo has massively outperformed the Zacks Toys-Games-Hobbies industry in the last one-year. While the stock gained 57%, the industry returned 25.8%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

2. Citing sources familiar with the matter, Eurogamer.net reports that Nintendo is gearing to launch a mini version of SNES. Reportedly, Nintendo is working on the product console which was a huge hit in the 90’s and aims to make it available in the market over the holiday season (around Christmas) this year. SNES was the company’s second console after the monster hit NES. The news comes on the heels Nintendo’s announcement regarding the discontinuation of NES Classic Mini. Released last year, mini NES classic found many takers.

3. Meanwhile, Electronic Arts announced that the sequel of its hugely popular mobile game, Star Wars Battlefront (2015) will be out this November. Battlefront sold about 14 million copies. The release of Star Wars: The Force Awakens gave it a major boost. However, players complained about the lack of single player mode. Nonetheless, with Battlefront 2, players can have both player modes—single as well as multiplayer.

We believe that Battlefront will benefit greatly from Walt Disney’s DIS ambitious plan to revive the Star Wars franchise. Disney has already announced two more sequels following Force Awakens and three standalone movies to be released over the next few years. Released last December, Rogue One (first standalone movie) was one of the top grossing movies of 2016 with over $1 billion in worldwide box office collections.

A couple of days back, the first trailer for Star Wars: The Last Jedi was unveiled and has already garnered over 6 million views on YouTube so far. Last Jedi releases in December this year. Holiday gift-giving frenzy, combined with the excitement build-up prior to any Star Wars movie release should boost sales of Battlefront II.

At present, Electronic Arts carries a Zacks Rank #4 (Sell).

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

2.69%

12.70%

EA

2.79%

10.53%

GLUU

3.52%

16.34%

MSFT

-0.27%

14.41%

NTES

-4.00%

0.62%

TTWO

6.09%

37.91%

ZNGA

0.71%

-3.09%

Over the last five trading sessions, Take Two Interactive TTWO was up 6.09% whereas NetEase NTES was down 4%.

Computer and Technology Sector 5YR % Return

Computer and Technology Sector 5YR % Return

In the last six-month period, Take Two Interactive surged the most (37.91%). 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 free-to-play games space with the acquisition of game developer, Social Point. The acquisition will help it boost its performance going ahead. Also, the company is well positioned to benefit from the highly anticipated launch of Red Dead Redemption 2 later this year.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.

Zynga ZNGA was down 3.09% over the same time frame owingto a slowdown in its user growth for a while, which remains a major concern. Moreover, a slowing web business along with intensifying competition from the likes of Glu Mobile GLUU, Electronic Arts and Nintendo remain concerns.

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