Wedbush's August Video Game Industry Summary

Michael Pachter of Wedbush reviewed key developments in the video gaming industry in a monthly recap note.

Pachter noted that his proprietary "Wedbush Video Game Index," a market-cap weighted index of video game companies, rose 4 percent in August, outperforming the 6 percent decline seen in the S&P 500 and Russell 2000 indices.

A Few Names And Numbers

Of note, Activision Blizzard, Inc. (NASDAQ: ATVI) saw its stock rise 11 percent following a "very strong" earnings report early in the month along reports that it will be added to the S&P 500 index. Shares of Electronic Arts Inc. (NASDAQ: EA) finished the month lower by 8 percent after an "impressive" 10-month rally. Shares of Take-Two Interactive Software, Inc. (NASDAQ: TTWO) fell 8 percent likely due to concerns about its long-term release slate.

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Retail

On the retail front, GameStop Corp. (NYSE: GME) saw its shares ending the month lower by 7 percent due to concerns over pre-owned margins, Technology Brands' profitability, management's "conservative approach" to its full year guidance and the ongoing negative impact of digital full game downloads.

Meanwhile, according to NDP data, July's U.S. console/handheld software sales were roughly flat year-over-year at $179 million, which was actually short of the $206 million Pachter was expecting. The analyst suggested sales were negatively impacted by a "seasonally sluggish period" along with a growing shift to digital downloads, and the popularity of bundles.

In addition, sales were down "significantly" month-over-month, although this was attributed to an extra week in the June retail month and the debut of the latest "Batman" release in June.

"Notwithstanding significant overall market volatility, the video game publishers have continued to shine two-thirds of the way through 2015," Pachter wrote. "The pace of next generation console sales from Sony and Microsoft has continued to impress, and a broad lineup of games announced at E3 has reinforced investor optimism that game sales will likely grow 10 percent in 2015 and again in 2016."

The Bottom Line

Finally, Pachter stated that he remains "positive" over Electronic Arts, Activision and GameStop, while the Take-Two's "lack of visibility" is an "impediment to attracting greater investor interest."Image Credit: Public Domain