Not Just Nintendo: It's Been A Good Year For Video Game Stocks

Not Just Nintendo: It's Been A Good Year For Video Game Stocks

September 2016


Nintendo shares have enjoyed a massive rally on the back of the frenzy over the Pokemon GO mobile game, but the Japanese company is just one of a handful of video game stocks posting solid returns in 2016. Analysts are bullish on further gains ahead, largely from the small, but fast-growing mobile segment.

Research firm Newzoo estimates mobile gaming revenue will grow 21.3% globally in 2016, dwarfing the 8.5% pace of overall gaming, and overtaking PC games for market share. While data firm Statista estimated that revenue from mobile gaming download in U.S. is expected to grow to $1.32 billion in 2016, from $0.91 billion in 2013. 

Forecasts like that help explain why Nintendo shares surged more than 40% in the few days after Pokemon GO’s release and why other game publishers are seeing their stocks perform well this year as investors dream about big mobile profits.

Activision Blizzard, Electronic Arts and Take-Two Interactive are all beating the broader market this year, and they each touched new record highs this week.

One of the catalysts for gaming companies has been the “monetization of profit dollars from mobile games,” said Gus Tai, general partner at venture capital firm Trinity Ventures, who is also invested in two gaming companies. “If you look at the top two mobile games, they do a billion dollars of revenue a year. Four years ago a top gaming title on Apple might be doing $20 million or $50 million.”

Activision, maker of popular console games like Call of Duty, World of Warcraft and Diablo, paid $5.9 billion for Candy Crush maker King Digital earlier this year. Its shares are up 8.7% this year, compared with the S&P 500′s 5.3%.

Electronic Arts, publisher of Star Wars titles and sports franchises like Madden NFL, has registered a consistent increase in revenue from its mobile segment quarter over quarter. The sales from mobile gaming were up 15% in the fourth quarter of fiscal 2016 in comparison to the same quarter last year.  According to research firm App Annie, EA had the most downloaded mobile games on Android and Apple in 2015. EA’s stock is up 12.9% this year.

Take-Two Interactive posted a 31% gain in annual revenue for its 2016 fiscal year ending in March, and pinned some of the success on mobile gaming. The maker of the widely-popular Grand Theft Auto franchise and World Wrestling Entertainment games brought some of that intellectual property to mobile games, like GTA: Liberty City Stories and WWE SuperCard for tablets and smartphones. WWE SuperCard, has been downloaded more than 10 million times and is among company’s most financially successful free-to-play mobile offering, CEO Strauss Zelnick said in last quarter’s earnings call.

Take-Two shares have risen 13% year-to-date.

Nintendo has been the biggest winner though, even after the stock cooled off from its Pokemon-fueled hot streak. The initial rally after the U.S. launch of Pokemon Go added billions of dollars to the Tokyo-listed company’s market value, but there are some questions about just how much the company will make off the game, and whether it will have staying power.

“If you have the macro factors such as mobile as a channel, virtual reality, augmented reality as canvas for future revenue growth and disciplined earnings growth, then I think Pokemon Go is just an example, an indication of what’s possible,” says venture capitalist Tai.

Mobile is clearly a rising force for video game makers, and one they’re focused on growing, but the more traditional gaming platforms still have their place. After all, Nintendo shares added another 15% Thursday and at least some of that was attributed to news that nostalgic gamers will love: the company will launch a mini version of its original Nintendo Entertainment System with 30 classic games in November.


This article was written by Shreya Agarwal from Forbes and was legally licensed through the NewsCred publisher network.

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