Video Game ETFs in Focus on Upbeat Earnings
Results posted by video games companies have boosted investors’ confidence in the sector, portraying endurance after a difficult last year. Last year the sector witnessed slow growth after experiencing an upturn ignited by stay-at-home orders during the pandemic.
In 2020, the global gaming market size was of USD 203.12 billion. It is expected to expand at a remarkable pace, soaring from USD 229.16 billion in 2021 to a staggering USD 545.98 billion by 2028. Throughout the forecast period, the market is set to maintain a robust CAGR of 13.20%, as reported in GlobeNewswire.
A Peak Into How TTWO Performed
In the fourth quarter of fiscal 2023, Take-Two Interactive Software TTWO recorded a loss of $3.62 per share, in contrast to earnings of 95 cents per share reported in the same quarter of the previous year.
In the reported quarter, net revenues experienced a significant surge of 55.5% year over year, reaching $1.45 billion. Adjusted earnings per share for the quarter were 85 cents compared to $1.16 per share in the year-ago quarter, beating the Zacks Consensus Estimate of $0.68 per share surpassing by an impressive 25%.
Game revenues, constituting 87.6% of total revenues, exhibited strong growth of 39% year over year, totaling $1.27 billion. Additionally, advertising revenues, contributing 12.4% of total revenues, saw a remarkable surge of 841.9% year over year, amounting to $179.9 million.
Take-Two's top-line growth was fueled by the success of popular titles like NBA 2K22, NBA 2K23, Grand Theft Auto Online, and Grand Theft Auto V. The company has optimistic expectations, planning to release 36 video game titles by 2026, projecting $8 billion in net bookings and over $1 billion in operating cash flow by 2025, as mentioned in an article by Reuters.
How Did Electronic Arts Perform in the Recent Quarter?
Electronic Arts EA reported quarterly earnings of $1.77 per share, surpassing the Zacks Consensus Estimate of $1.31 per share. This represents a significant improvement from earnings of $1.18 per share in the same period last year, after adjusting for non-recurring items.
Furthermore, the company generated revenues of $1.95 billion in the quarter ending March 2023, surpassing the Zacks Consensus Estimate by 12.67%. This reflects growth compared to revenues of $1.75 billion in the same period last year. Electronic Arts exceeded consensus estimates twice in the last four quarters.
How Did Activision Blizzard Perform in the Recent Quarter?
Activision Blizzard Inc. ATVI came out with adjusted quarterly earnings of $0.60 per share, beating the Zacks Consensus Estimate of $0.58 per share. This compares to earnings of $0.38 per share a year ago.
Activision Blizzard posted revenues of $1.86 billion for the quarter ended March 2023, surpassing the Zacks Consensus Estimate by 1.19%. This compares to year-ago revenues of $1.48 billion. The company topped consensus estimates for revenues each time over the last four quarters.
ETFs in Focus
Below, we highlight a few ETFs with exposure to the above-mentioned stocks, to gain exposure to the rebounding video gaming industry.
Roundhill Video Games ETF (NERD)
The Roundhill Video Games ETF offers investors exposure to the video game sector by providing investment results that closely correspond to the performance of the Nasdaq CTA Global Video Games Software Index. NERD holds 38 securities in its basket, with Nintendo Co Ltd NTDOY being the top company weighing 15.75% of the assets, followed by Electronic Arts and TakeTwo Interactive Software with a share of 10.26% and 7.72%, respectively.
The fund gathered $25.93 million in its asset base and charges 50 bps in annual fees. It has generated returns of 11.89% year to date, having earned 5.67% in the past three-months.
Global X Video Games & Esports ETF (HERO)
The Global X Video Games & Esports ETF seeks to provide investment results that generally correspond to the performance of the Solactive Video Games & Esports Index. The basket has 50 securities, with TakeTwo Interactive Software being the top company having a share of 7.51% of the assets. Electronic Arts has a share of 5.79%.
The fund has been able to manage $173.81 million in its asset base, charging 50 bps in annual fees. The fund has earned 8.59% year to date.
VanEck Video Gaming and eSports ETF (ESPO)
The VanEck Video Gaming and eSports ETF seeks to replicate, as closely as possible, the performance of the MVIS Global Video Gaming and eSports Index. The fund has 25 securities in its holdings, with NVIDIA Corp NVDA being the top holding having a share of 9.59%. The fund also has allocations to TakeTwo Interactive Software (4.93%) and Electronic Arts (4.67%).
The fund amassed $286.52 million in its asset base. It charges 56 bps as its annual fees and has gained 22.7% year to date. The fund is added 7.92% in the past three months.
Wedbush ETFMG Video Game Tech ETF (GAMR)
The fund seeks to provide investment results that generally correspond to the performance of the EEFund Video Game Tech Index. It holds a basket of 87 stocks. TakeTwo Interactive Software and Electronic Arts have shares of 2.7% and 2.54%, respectively.
The fund has gathered $51.53 million in its asset base and charges 75 bps in annual fees. GAMR is up 9.33% year to date.
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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report
Electronic Arts Inc. (EA) : Free Stock Analysis Report
Global X Video Games & Esports ETF (HERO): ETF Research Reports
Nintendo Co. (NTDOY) : Free Stock Analysis Report
Wedbush ETFMG Video Game Tech ETF (GAMR): ETF Research Reports
VanEck Video Gaming and eSports ETF (ESPO): ETF Research Reports
Roundhill Video Games ETF (NERD): ETF Research Reports
