Being a self-confessed gaming geek, I love to try my hand at new games; however, I am far from being a snob - Farmville and Cityville are my guilty pleasures. Since I also spend most of my time analyzing stocks, it seemed interesting to take a look at the companies behind these crazy good game titles. Although most of these stocks are at a somewhat depressed price level, I think they present cautious investors with some good opportunities. So, let's take a look at some of the major gaming stocks and see what the future holds for these stocks. I have arranged them in an increasing order of importance from an investment point of view:
Zynga Inc. (ZNGA): The stock was debuted with much fanfare but failed to perform since then. Like its main benefactor, Facebook (FB), even this stock is doing its best to remain afloat, but the outlook remains gloomy. The company is not only seeing floundering revenue but is also facing exodus of its top talent.
Zynga recently reported the departure of its chief revenue and marketing officer Jeff Karp. The company reported over a billion dollars in revenue but its operating expenses are equally high and margins are negative. The stock price has already lost over 80 percent of its value from its 52 week high price of $15.91. The stock is currently at $2.91.
The gaming company is said to be planning to make a foray into online casino gaming, but since online gambling is more or less in a very nascent stage in the U.S., I am highly doubtful that the move will provide any breather to the sinking stock. The stock looks like a poster boy of impending internet bubble and while I love playing Farmville, the only way to use this stock is to short it.
Electronic Arts Inc. (EA): With titles like The Sims, Madden NFL Series and FIFA series in its portfolio, Electronic Arts is arguably the big daddy of the game publishing industry. Although I am a big fan of some of its games, I find it difficult to be enthusiastic about the stock. At $13.85, the stock is about 50 percent down from its 52 week high of $26.13 and is dangerously close to its 52 weeks low of $10.77. With market capitalization of about $4.4 billion, the company is about twice the size of Zynga. However, unlike Zynga, the stock has proved its resilience over the course of time and the company seems to be working towards bringing the stock price back on track.
Electronic Arts reported bigger quarterly loss in July, but on the brighter side, it also maintained an "Overweight" rating from Piper Jaffray. Its latest title Madden NFL 13 also managed to create new records for fan engagement and sales numbers. Electronic Arts estimates to have sold about 1.65 million units of the game in the first week of its launch. The company has become the casualty of a downward trend in the overall gaming industry. However, it has a solid title line up and at current pricing shows promise for moderate gains in long run.
Activision Blizzard Inc. (ATVI) is yet another big name in the gaming industry struggling hard to maintain its position in the choppy market. Unlike the above stocks, Activision Blizzard has remained pretty stable in recent times. However, let me take you through the cons of this stock first.
The company reported a drop in its quarterly revenue and net income in August, but its adjusted results managed to give a positive surprise to the market. Activision Blizzard is also set to benefit from the advent of cheaper tablets, especially the Kindle Fire. The company is facing deteriorating subscriber base for its smash hit game World of Warcraft, but Activision Blizzard is looking to steer itself towards new pastures such as mobile gaming.
It announced the availability of its Skylanders Cloud Patrol title for Amazon Kindle Fire and Kindle Fire HD. The title is already available for iPad and iPhone. Activision Blizzard is serious about its mobile gaming venture as it also incorporated mobile features to its highly popular title Call of Duty. With market capitalization of more than $13 billion and earnings per share of $0.70, Activision Blizzard is by far among the most promising gaming stocks. With its old fashioned stable stock price performance, it may not look very glamorous but certainly has the pizzazz to deliver results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.