Electronic Arts Among Companies Scoring as Video Game Sales Move Higher

Includes: ATVI, EA, GME, KNM, TTWO
by: Investing By Wali

Electronic Arts (ERTS) announced its earnings Wednesday (full article), which came in with a non-GAAP revenue of $995 million, past the high end of guidance at $950 million, and non-GAAP EPS of $0.25, which met high end guidance. These are certainly good numbers to see from a company that has been losing money for some time now - and shares were up almost 9% on this news.

This could indicate that new video games are becoming a more popular product again, rather than being foregone as a luxury good. Electronic Arts is a good company to use to gauge this because it is probably the most diversified video game company out there, with games in every area from sports to shooters, consoles to PC, for children and adults. The company's total console net revenue increased by 20% year over year from increases in Playstation 3 and Xbox 360 game sales, while handheld, mobile, and PC were all relatively flat.

The increase in sales for console games doesn't just benefit Electronic Arts, however. Some of its competitors, such as Activision Blizzart (NASDAQ:ATVI), Konami (NYSE:KNM), and Take-Two Interactive Software (NASDAQ:TTWO) could also see an increase in sales, which would mean a boost in profits all around.

If consumers are really increasing their spending on video games however, while the companies producing them will all be gaining revenue individually, the retail videogame sellers will benefit as well. Large retailers such as Best Buy (NYSE:BBY) and Wal-Mart (NYSE:WMT) may not notice a big increase in sales, since video games aren't their main product. But, Gamestop (NYSE:GME), whose only products are new and used video games, consoles, and other gaming accessories, could stand to see a big gain in profits.

Gamestop already increased its guidance for this year with its last earnings announcement, and if video game sales can continue to grow, the company could certainly see an increase in sales and profits going forward. Gamestop reports its first quarter earnings on May 19, 2011.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GME, TTWO, BBY over the next 72 hours.