Game company stock

[Hanzii]

I know we had a thread about this, but Search gave me nothing.

We publish a finacial magazine where I work and one of their writers have decided that since I play and review games, I also have an insight into what the next great hit will be and will use that information as part of a "stocks to look out for"-guide in an article about game company stock.

Of course I'm still flabbergasted by the Wiis success and thus not the right person to ask, so I turn to you.

I don't expect miracles or somebody to really know some undervalued company destined to make the next big thing, but I do hope somebody has insights or just interesting points to offer.

What do you own. What do you wish to own. Is there anything worth looking at now with stock prices low?

I won't use the information to pretend to be an expert. The guy knows, that I know a bit about games and nothing about stocks (or even which gaming companies are listed) but his questions has gotten me curious as well.

[Kraaze]

Interesting question, unfortunately stock values are driven by a lot of financial/business factors that don't have a lot to do with how cool the upcoming games are.

The best I think you can do from where you sit and what you know is to maybe make a guess on what upcoming AAA games you think will be big hits and which ones won't. Trust me, you will be doing this with a lot more experience and skill than a Wall Street analyst. Suggest that the publishers of the games looking good are probably going to do a little better than analysts expect, and the ones with the bad looking games may do a bit worse.

[wisefool]

You're doing it backwards. You should find someone with horrible taste (like me), then start a hedge fund and SHORT all those stocks.

[Hanzii]

Interesting question, unfortunately stock values are driven by a lot of financial/business factors that don't have a lot to do with how cool the upcoming games are.

The best I think you can do from where you sit and what you know is to maybe make a guess on what upcoming AAA games you think will be big hits and which ones won't. Trust me, you will be doing this with a lot more experience and skill than a Wall Street analyst. Suggest that the publishers of the games looking good are probably going to do a little better than analysts expect, and the ones with the bad looking games may do a bit worse.

I know. Things I have next to no insight in, so I'll try and do what you suggest. But I'd still like to hear what you guys think.

[Kraaze]

Myself, I wouldn't touch a gaming stock with a ten foot pole right now. I know the argument that games offer excellent entertainment bang for the buck in times of economic trouble but I don't personally think that's going to translate to good performance overall for games as a business. Just more moderated losses.

[Charles]

I own a good chunk of ubi stock that was worth 120% more six months ago, and I seriously wish I had, say, $50000 to dump in it right now for when it goes back up.

[Jojo]

I agree with Kraaze. I don't think anyone is bubbling under right now, instead everyone is going bust. This is the worst time to try and make guesses about who is going to have the next big hit. My personal opinion is that small developers are all teetering on the edge if they haven't gone down already, which reduces the chances of any publisher having a "surprise big hit" soon.

The big developers and publishers are laying off people and casting off projects like crazy, in order to cut budgets. If you're determined to buy gaming stock then the only safe option right now is to buy into big places like EA, Ubi or Activision, hoping that they get their act together and prices go back up, but that's not going to be any kind of exciting or spectacular profit. I've never followed Nintendo stock to know what the deal is with them.

[Lunch of Kong]

I own Nintendo shares. The stock has dropped a bit, but dividends come regularly, and are taxed by the Japanese government.

[Jakub]

Isn't Nintendo stock a bubble stock? I heard it's inflated.

[Equis]

Just buy Blizzard.

[Kraaze]

Just buy Blizzard.

Blizzard is about the only game company that I think will do well this year. The problem is, Blizzard isn't a company per se. They are a little piece of a bigger conglomerate, and the other pieces of that conglomerate are exposed to markets that aren't so hot. So one can't buy a stock that correlates just to Blizzard's results unfortunately.

[Vincent_GC]

I personally play it safe when investing in game companies. I pretty much stick with Nintendo, EA, Ubisoft and Activision/Blizzard.

If your going to buy, I suggest buying soon while it's still low. Personally, I am thinking of investing in Take 2 in case it does get bought in the somewhat near future.

[Michael Fitch]

Greetings:
I'll agree that Activision Blizzard is a good buy opportunity. The stock is depressed by the overall market trend right now, while the fundamentals of their business haven't really changed; since the merger, they've cut some dead weight and are well-positioned to use the expertise and contacts Blizzard has developed to play in the Asian markets, particularly China, which puts them ahead of other western publishers by a significant margin. Not to mention that WoW is a license to print money for the next several years. They have a comparable upside growth opportunity to Ubi, but with a much broader portfolio and greater capitalization.

Nintendo is also a safe play, with their platform dominance, but I don't know that they have as much room for growth. No one on the third-party business has really been able to break out, which limits their ability to turn their platform dominance into licensing revenue, and while their first-party still does great business, they haven't demonstrated that they can expand out from there. The DS piracy and lack of online support is going to limit their ability to monetize markets like China and India, so while I don't think they're going south in the perceivable future, I don't think they can continue to expand based on hardware adoption as they have in the last couple of years; I could be wrong about that, though.

I think the second tier is Ubi, EA, and Microsoft. Ubi has outperformed by introducing successful new IP on a regular basis, but their reach in terms of audience is still somewhat limited, they haven't been able to break into the MMO space in a meaningful way, and their markets are still almost exclusively Europe and North America; I'm not sure that they're capitalized or positioned well enough to continue their current growth trend, particularly if growth in the NA/Europe market slows. EA has a lot of good product, still, and has been hammered by not showing huge growth, but it's too early to write them off. They've been the most successful at turning out yearly release IP, and with BioWare and Rock Band on the books, I think there's still significant potential there, but the question is whether it will be enough to shake out of their institutional inertia and show real growth. Microsoft, in my opinion, has a clear edge in online console and content distribution, but their challenge is that the games business is so small compared to the rest of their product line that it doesn't make sense to invest in their stock based solely on their game performance.

Sony is probably in the worst shape for platform-holders, with hardware adoption rates trailing, few notable platform exclusives, the shrinking of their MMO business, and their exposure in the high-end electronics sector. Even if they did okay on third-party cross-platform releases, they're still going to get hit hard by the tightening economy in TV, blu-ray, and high-end notebook sales. They're going to need a new, killer product to break out of this slump, and while they may well do that, it's a very speculative bet, since all other signs point to trouble ahead.

Just a few random thoughts.

Best,
Michael.

[Reed]

I own ATVI, mostly because of Blizzard. And then there's Call of Duty and Guitar Hero.

Although I'm concerned that they will burn out those two franchises in the next couple/few years just like they did with Tony Hawk...

[docvego]

I own ATVI as well. 4thQ Earnings come out Feb 11th.

[Kraaze]

I own ATVI as well. 4thQ Earnings come out Feb 11th.

Well, EA just announced they took a pounding, so I wouldn't be too hopeful for ACtivistion either


Our holiday quarter came in below our expectations and we have significantly reduced our financial outlook for fiscal 2009, a clear disappointment.



Ouch. They are going to lay off 11% of their workforce and close 12 facilities as well.

[J. Matthew Zoss]

Am I crazy to think that Atari stock might be a good buy? They've made some wise publishing decisions lately, like picking up Riddick and Ghostbusters.

Not that I actually have any money to buy stock...

[Jakub]

ATVI is sitting at almost 25:1 P/E. That's pretty high, no?

[Bill]

ATVI is sitting at almost 25:1 P/E. That's pretty high, no?

Yeah, probably, especially for a mature industry and a large company. But I wouldn't base a decision just on that.

[Ex-S Woo]

You might be surprised how often good games != sales. Before you take the plunge you probably should think about how well you realistically think their games will sell, how much the games cost to develop, etc etc.

Am I crazy to think that Atari stock might be a good buy? They've made some wise publishing decisions lately, like picking up Riddick and Ghostbusters.

Not that I actually have any money to buy stock...

[Omniscia]

I bought one share of Take 2 some time ago, just for the hell of it, but that's it...