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Videogame Stock Roundup: Nintendo's Switch Release, Facebook Rift Price Cut, Sony PS VR's Record Sales & More

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There were quite a few developments in the video game space last week. The Japanese giant Nintendo NTDOY, released it much anticipated console, Switch amid much fanfare. Also, Facebook Inc FB slashed price of its VR headset, Rift by $100 while Sony Corp’s SNE PS VR breaks sales records.   

Recap of the Developments

1. Nintendo’s Switch had a “smooth debut,” reported Bloomberg. According to the report, the units were soon outsold following the release “signaling Nintendo is on track to reach its goal of shipping 2 million units by the end of the month.”

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

The new Zelda game which has a Metacritic rating of 98 out of 100 should boost Switch sales. Nintendo needs a hit in the form of Switch, following the debacle of its last console Wii U. However, a hefty price and apparent lack of any ground-breaking/differentiating features from the consoles that are available in the markets right now could cost the company heavily. Nintendo carries a Zacks Rank #3 (Hold).

2. Facebook has slashed the price of its VR headset Rift and Oculus Touch Motion controllers by $100 each. The step is widely viewed as a measure to boost sales. FB chief Mark Zuckerberg earlier commented that he expects Rift to sell about 50 to 100 million units over the next 10 years. However, Bloomberg quoting SuperData Research, reports that only 350K units were sold last year. Price has been a major deterrent for Rift having failed to gain a mass adoption. Rift was originally priced at $599, much higher than Sony’s PS VR.

Facebook had acquired Oculus for $2 billion in 2014. With Oculus, the company is trying to fuel the company’s ambitious AR/VR efforts. Oculus has long been labeled as a multibillion dollar opportunity along with Facebook’s other subsidiaries like Messenger, Instagram and WhatsApp. Facebook carries a Zacks Rank #3.

3. While Facebook is trying to boost sales of Rift, Sony’s PS VR witnessed unprecedented sales since its release in October 2016. As on Feb 19, 2017, Sony Interactive Entertainment (SIE), the gaming division of the company, reported that it had sold 915,000 PS VR units in the four months following its launch.

It was prudent on part of Sony to capitalize on its powerful installed base of over 53.4 million PS4 customers to drive VR sales. Plus, the company’s decision to price headset at just $399 was considered a smart ploy as it offered the device for a discount of over $200 compared to other headsets available in the market. Sony carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

4. Meanwhile, Microsoft Corp (MSFT) launched a subscription based gaming service, Xbox Game Pass. Reportedly, with Xbox Game Pass, users can “download unlimited games” from Xbox One and Xbox 360 games roster for a subscription of $9.99 per month. Though similar to Netflix Inc’s (NFLX) streaming service, Xbox game pass differs a lot from Netflix. Per media reports, users are required to download games rather than stream. This alleviates the concerns of having a strong bandwidth and internet connectivity all the time.Microsoft carries a Zacks Rank #3.

However, the news caused shares of GameStop (GME) to fall as the Game Pass emerges a threat to its business. Analysts observe that GameStop is a video games retailer which buys and sells video games both new and used. However, with most new games available for download, GameStop’s business thrives on selling used games. With Xbox Pass even this is highly at risk. At present, GameStop 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

2.98%

9.07%

EA

-0.33%

4.25%

GLUU

-7.28%

-17.67%

MSFT

-0.94%

10.99%

NTES

-3.21%

34.65%

TTWO

-3.03%

29.49%

ZNGA

2.24%

0.74%

 

 

 

 

 

 

 

 

 

 

 

 

 

Over the last five trading sessions, Glu Mobile Inc. GLUU was down 7.28% whereas Activision Blizzard ATVI was up 2.98%.

Computer and Technology Sector 5YR % Return

Computer and Technology Sector 5YR % Return

Over the last six-month period, NetEase NTES surged the most (34.35%). Recently, NetEase reported solid fourth-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. NetEase’s online gaming revenues grew 62% in the quarter. Also, NetEase has announced a new $1 billion buyback program for its ADRs over a one-year time frame.

Glu was down 17.67% over the same time frame owingto underperformance of most of its releases. To improve its performance, Glu announced that it has inked a deal with MLB and Kris Bryant and many more for releasing a new title under its Tap Sports Baseball franchise. The company brought on board, a video game industry veteran Nick Earl as the new CEO while Niccolo de Masiwill will now be the chairman of the company. It also acquired a majority stake in CrowdStar, which develops free-to-play mobile games. It recently acquired a mobile game developer, Plain Vanilla for $7.5 million

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Netflix, Inc. (NFLX): Free Stock Analysis Report
 
NetEase, Inc. (NTES): Free Stock Analysis Report
 
Sony Corp Ord (SNE): Free Stock Analysis Report
 
Microsoft Corporation (MSFT): Free Stock Analysis Report
 
Gamestop Corporation (GME): Free Stock Analysis Report
 
Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
 
Nintendo Co. (NTDOY): Free Stock Analysis Report
 
Glu Mobile Inc. (GLUU): Free Stock Analysis Report
 
Facebook, Inc. (FB): Free Stock Analysis Report
 
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