Video Game Stock Roundup: Take-Two, Activision and IGT Remain in Focus - Analyst Blog

Over the last five trading sessions, Video Game stocks mostly witnessed a mixed trend. While companies like Activision Blizzard, Inc.'s (ATVI) stock prices gained momentum upon incredible game reviews, Take-Two Interactive Software Inc.'s (TTWO) hit game Grand Theft Auto V landed in controversy due to its content.

Further, long-pending merger agreements between GTECH S.p.A. and International Game Technology (IGT) remained in the spotlight. 

Top Stories Over the Last Week

1.    Take-Two Interactive Software Inc.'s Grand Theft Auto V recently faced criticism for its mature content in Australia despite gaining worldwide popularity. Reportedly, over 40,000 people in Australia have slammed the game's R-rated content deeming it unsuitable for teenage video game players. (Read more: Take-Two's Grand Theft Auto V Sparks Debate in Australia)

2.    Italian gaming company and the world's largest operator of lotteries, GTECH S.p.A. has recently announced its decision to go ahead with its merger plans with International Game Technology. In July this year, GTECH announced its plan to expand in the international market with the acquisition of IGT for $6.4 billion.

3.    Perfect World Co., Ltd. (PWRD) shares fell nearly 7% on Dec 3 and continue to trend downward following the announcement of its third Quarter 2014 earnings results, wherein its net income dropped almost 50% from the year-ago quarter. The company also reported operating loss as against profit in the previous quarter and the year ago quarter, which we believe triggered downfall.

Notably, the online game developer and operator has seen 1 negative revision over one month and its current year earnings consensus moved lower over the last 30 days. (Read More: Perfect World Crumbles: Stock Falls by 6.6%).

4.    Activision Blizzard, Inc. shares remained buoyant this week upon receiving Call of Duty Online reviews in China. The company plans to launch a free-to-play online version of the hit video game Call of Duty in the country in the first quarter of 2015. Hence, the current positive review (9.5 out of 10 user rating) makes Call of Duty Online one of the most anticipated upcoming games in China.

5.    International Game Technology paid $14 million to a lucky winner, who won the Megabucks video slot jackpot at Rampart Casino in Las Vegas. The latest jackpot amount solidifies the company's Megabucks video slot as one of the most successful slot title boasting a payout history of over $1 billion since its inception in 1987.

Performance

The following table shows the price movements of the major video game companies over both the past five trading days as well as the last six months:

Over the last 5 days, Electronic Arts Inc. (EA) remained the top gainer with 5.8%. The stock witnessed strong upward earnings estimate revision, indicating that analysts are becoming a bit more bullish on the firm's prospects in both the short and long term. In addition, the company came up with some positive forecast on its margin growth suggesting that it remains ahead of time in achieving its 20% operating margin goal.   

The company that lost the most over the same time frame is NetEase, Inc. (NTES) declining almost 3.5%. As the stock continues to hover around the 52-weeks high price, we believe profit booking activities by investors might have led to the recent drop in the stock price.

Over the six-month period, however, NetEase gained the maximum — nearly 50%. We believe the company's exemplary performance across business segments and the recent upgrade by JPMorgan Chase & Co. from a neutral rating to overweight contribute to its rising market value. In addition, expected positive impact of China interest rate cuts on the company given its high exposure in the Far East market remain a significant growth catalyst. On the other hand, the stock that lost the most over the same time period includes Zynga, Inc. (ZNGA) with 15% decline in prices.

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