Posts for Ticker ‘Wii’

Are Video Games Really Recession Proof? (GME, ERTS, ATVI, THQI, TTWO)

NPD released its monthly video game data showing that December video game spending increased 30.9% from December 2006. What is interesting is that software sales of game titles were up 36%, while hardware in game console sales was up 17%.  These are strong numbers and while that strength is irrefutable, 2008 will be a tough repeat because of comparable sales to 2007 over 2006 levels from late 2006 console launches.  The question is, "Are video games recession-proof?" 

Video game sales are in the home and frankly video games are perhaps one of the cheapest forms of entertainment on a dollar per hour basis there is.  Recession-proof might be a stretch.  Sales will be strong and there will still be money made by the game publishers.  But the holy grail of ‘comparable sales’ is going to be a tough one on the console makers in 2008.  Here are just some of the articles today on the bet that game sales will or won’t hold up:

In hardware sales saw a 63% gain for the Sony PlayStation 3, a 123% rise in the Nintendo Wii, and up 15% in Xbox 360 sales. Hand-held device sales rose 54% for the Nintendo DS and 11% for the Sony PSP.

The next assured mega-hit title coming out is Take-Two’s (NASDAQ: TTWO) Grand Theft Auto IV.  But at some point (and likely some point soon) these console sales aren’t going show the same gains like in 2007.  This notion that World of Warcraft may potentially be coming to video game consoles might add literally millions of gamers to the MMORPG craze.  All of this would be good for video games.  Electronic Arts (NASDAQ: ERTS) has its waves of upcoming releases in the year and Activision (NASDAQ: ATVI) is looking interesting in the upcoming Activision-Blizzard merger.  Microsoft’s (NASDAQ: MSFT) Bungie Studios may soon be its own public company too. Interestingly enough, we expect another merger in this sector although maybe not in the classic scenario and that has been under review for our Special Situation Investing Newsletter. 

We think that GameStop (NYSE: GME) will actually hold up better thanoverall stores like Best Buy or Circuit City based on game title salesin 2008, but there just aren’t any new major platform launches on thehorizon for maybe another two years.  That varies from person toperson, but some feel we’ll have the same gaming systems until 2011.  Our notion is that video games might actually be somewhat recession-proof.  But with $1.76 as the high part of the guidance out of GameStop, at $50.00 this still leaves its P/E at 28.4.  If the economy gets any worse than we think can then investors might not be wanting to pay that multiple after a 400% stock rise since the start of 2005.  We have been very positive on this on for some time and we don’t think it will go to hell in a hand basket.  But it will take the U.S. not falling into a recession for us to stay very positive on GameStop today and this stock has been peaking since November.  GameStop also a competitor coming on strong as well.

GameStop shares have fallen from $60+ at the start of 2008 before it gave raised guidance that the street panned and shares now sit right at $50.00 (with a $49.72 close).  An 18% slide is significant, even if it is still up 100% from the 52-week lows.

Jon C. Ogg
January 18, 2008

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Posted on: January 18, 2008 – 1:38 pm in Video Games, , , , , , , , , ,

Nintendo Executives Follow 24/7 Wall St. (NTDOY, MSFT, SNE, GME) (7974.JP)

Just one week ago 24/7 Wall St. suggested that Nintendo (OTC:NTDOY) might try a Hail Mary Pass and offer a voucher with a guarantee if they can ramp more from manufacturing or if it can outsource more capacity.  The company launched a deal via GameStop (NYSE:GME) today for "rain-checks" so that if you pay the full console price that you can get your Wii by the end of January.  Hmmmmm, sounds awfully familiar….. 

If you look at how strong the data is you’d wonder how many Wii systems Nintendo could have sold if it actually had them in stock. The NPD data for the latest release shows the following console sales for last month:

  • Nintendo Wii at 981,000 units;
  • Microsoft Xbox 770,000 units;
  • Sony PS3 440,000.

We noted how American consumers are impatient, but this might just satiate at least some of the demands.  This is actually a pretty good number for Microsoft (NASDAQ:MSFT) but shows that Sony’s (NYSE:SNE) PS3 is a dud and still considerably underperforming.

Jon C. Ogg
December 14, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 14, 2007 – 1:14 pm in Video Games, , , , , , , ,

Ninetendo Wii Pass Microsoft Xbox For Global Lead

Data out today show that Nintendo’s Wii has now sold 10.57 million units worldwide. That passes the Microsoft (MSFT) Xbox 360 at 10.51 million. The Wii was introduced after Xbox, so the numbers are even more impressive for Nintento.

Sony (SNE) has sold only 4.3 million PS3s.

On the portable side of the ball, Nintendo has sold 48.83 million DS units, according to VG Chartz, compared to 22.84 million Sony PSPs.

Hard to find any good news in there for Sony.

Douglas A. McIntyre

Posted on: August 29, 2007 – 5:27 am in Uncategorized, , , , ,

GameStop’s New Highs After Earnings & Guidance (GME)

GameStop (NYSE:GME) is trading up 7% pre-market on what will be new yearly highs and all-time highs after posting earnings.  A quick summary is $0.13 EPS  on revenues of $1.3382B versus $0.09/R$1.2B estimates (prior guidance was only $0.06 EPS).  It now sees comparable sales up 30 to 32% and issued next quarter guidance of $0.19 to $0.21 EPS versus 0.18 estimates and raised its annual guidance.

Total sales increased 38.9% to $1,338.2 million in comparison to $963.3 million in the prior year quarter. Comparable store sales increased 29.1% during the second quarter, also beating previously released guidance of 16.0% to 18.0%. During the second quarter, new video game software sales surged 49% and new hardware sales soared 87%.  GameStop surpassed the 1,000 store count internationally and said it is on the way to achieving its forecast of opening between 500 and 550 new stores during the year.

RAISED GUIDANCE: For Q3 2007, GameStop is forecasting comparable store sales to range from +30.0% to +32.0%. Diluted earnings per share are expected to range from $0.19 to $0.21 (compared to $0.18 est.).  Due to strong Q2 it is raising full year 2007 diluted earnings per share guidance to range from $1.45 to $1.48; and revenues are now projected to grow between 20.0% and 22.0%, with expected comparable store sales ranging from +15.0% to +17.0%.

GameStop has to be loving the Wii.  The top selling video games during the quarter were GUITAR HERO II from Activision, NCAA FOOTBALL ‘08 by Electronic Arts, MARIO PARTY 8 by Nintendo, Nintendo’s POKEMON DIAMOND and PEARL, and FORZA MOTORSPORT 2 from Microsoft.  Also on deck for the coming quarter is Halo 3 sales, and it appears that over 1 million copies have been pre-sold from video game retailers in the U.S. alone.

GameStop’s prior high is $44.76 on a split-adjusted basis, and shares are up around $46.00 pre-market.

Jon C. Ogg
August 23, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: August 23, 2007 – 8:02 am in Earnings, Video Games, , , ,

Grand Theft Auto Delay Bad For Take-Two, Good For Other Game Publishers (TTWO, MSFT, ERTS, THQI, ATVI, GME)

Take-Two Interactive (NASDAQ:TWO) is showing how its woes are far from over.  The company is lowering guidance because it delayed the launch date for its upcoming blockbuster game Grand Theft Auto 4.  The company says additional development time is required to complete the title.  Hopefully, if Take-Two doesn’t want there name to be "took-none," they aren’t developing any more "Hot Coffee" scenes.  This GTA title is now being delayed to fircal 2008 instead of calender Q4 2007. 

Take-Two is also delaying its Manhunt 2 for PS2, PSP, and the Wii.   The losses now look large, quite large.  The company says it is in sound financial position, but they just now irritated shareholders and clients.  Investors who jumped in hoping that the new team was going to do a full takeover probably wish by now that they would have played a stock by the name of Forrest Gump’s fruit company.

There is always some good news, and this is the case for the rest of the sector.  Microsoft’s (NASDAQ:MSFT) Halo 3 is going to set records for game releases.  GTA was set to be another major blockbuster coming out right after Halo 3.  In short, Electronic Arts (NASDAQ:ERTS), THQ Interactive (NASDAQ:THQI), and Activsion (NASDAQ:ATVI) may have just gotten one monkey off their backs.   Activision (NASDAQ) just released earnings and is trading up about 1% on "Guitar Hero".   THQ Interactive (NASDAQ:THQI) traded higher today, but its shares are up another 1%; and Electronic Arts (NASDAQ:ERTS) is up almost 1% after a 7% rise today, despite its warning yesterday.   GameStop Corp. (NYSE:GME) isn’t faring as well since this takes out a key upcoming blockbuster title out of the Christmas season sales, with shares giving back gains today with a 3.6% drop in after-hours. 

We noted just yesterday how the sales out of the upcoming Halo 3 and GTA 4 would have acted as a suction against many of the outside game title sales for a period after those were released.  This delay of the GTA title just got rid of a monkey for the other game publishers. 

Take-Two shares are down almost $3.00 in after-hours trading down to $14.00. 

Jon C. Ogg
August 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: August 2, 2007 – 4:51 pm in Earnings Warning, Video Games, , , , , , , , , , , , , ,

Nintendo’s US Sales Smack Microsoft (MSFT) And Sony (SNE)

New data out from NPD, show Nintendo putting the wood to Sony (SNE) and Microsoft (MSFT) in game console sales during June.

PC World provided a table of June sales compared to May:

562,000 – Nintendo DS (+25%)
381,800 – Nintendo Wii (+13%)
290,100 – Playstation Portable (+24%)
198,400 – Xbox 360 (+28%)
98,500 – Playstation 3 (+20%)

Nintendo’s lead is now astonishingly wide and does not appear to be flagging as time goes on. The company recently announced that is earnings in the last quarter rose three-fold. This stands in contrast to the recent hardware Microsoft has had with its Xbox and the extended warranty it had to offer customers.

Nintendo’s success is an unlikely one, given the company’s relative size, especially 18 months ago. But, the Wii was different enough to be disruptive and appeals to consumers outside the hardcore gaming crowd.

And, that has been more than enough.

Douglas A. McIntyre

Posted on: July 25, 2007 – 9:34 am in Uncategorized, , , , ,

Nintendo Lays Siege To Micosoft (MSFT) And Sony (SNE) Again

Nintendo’s profit increase 4x in the quarter ending in June to $669 million. The company increased guidance for the year and the company raised its profit forecast by 40%.

Sales of the company’s Wii game unit have hit 9.1 million since the game was introduced last November. According to The Wall Street Journal: In June, Wii outsold the PlayStation 3 by nearly 4 to 1 and the Xbox 360 by almost 2 to 1 in the U.S., the world’s largest video game market, according to NPD Group Inc

In the meantime, Microsoft’s (MSFT) Xbox has suffered from hardware quality problems that lead the company to extend warranties on the machine and take a $1.1 billion charge.

But, the real damage is to Sony (SNE). According to the FT: Sony wants to  convince consumers that its games consoles are essential “living room hardware”, capable of seamlessly networking with other Sony devices. This makes the Playstation the cornerstone of Sony’s plans to sell HDTV and Blu-ray HD players. If the Playstation’s sales continue to flag, the company’s vision of the home entertainment center of the future could be irreparably damaged.

That damage is going from being a possibility to a certainty very quickly.

Douglas A. McIntyre

Posted on: July 25, 2007 – 4:34 am in Uncategorized, , , , , ,

Nintendo Shows Why It’s Ahead

Nintendo today announced a game controller that is operated the user’s feet. Called the "Nintendo Balance Board", the new product allows gamers to manipulate the action on their screens while moving around and on and off the device like skate boarders.

The new controller will also be launched with a new game called Wii Fit. Players will get points in the game for difficult moves jumping on and off the board.

The new development shows why Nintendo’s Wii is outselling Sony (SNE) PS3 and Microsoft (MSFT) Xbox 360. Even with price cuts these game consoles are too "old style" for anyone other than hard core players.

If the Wii continues with innovations like this, it is very likely to continue to draw those with more casual interest in video games, and strenthen its lead over rivals.

Douglas A. McIntyre

Posted on: July 11, 2007 – 2:19 pm in Uncategorized, , , , , ,

Sony (SNE) PS3 Price Cut: Another Sign Of Weakness

It would be tempting to think that Sony (SNE) is cutting its PS3 price in reaction to hardware problems with the Microsoft (MSFT) Xbox. But, the decision is probably due to the fact that the company is not selling many of its flagship game platforms.

Just last week, Sony’s president said the company would not cut PS3 prices. This week its appears that he may have been dazed or confused.

Sony knocked $100 off the cost of the PS3 in the US, bringing the retail cost to $499, more in line with the Xbox 360. Industry analysts say that the component costs for the game platform may have dropped enough to allow for the cut. But, it is a bit hard to believe that underlying hardware costs have dropped 20% in such a short time.

In other words, Sony is probably eating gross margin in a move to get moribund sales back on track.

In May, Sony sold less than 82,000 PS3s in the US. Microsoft sold about 155,000 Xboxs, and Nintendo sold over 338,000 Wiis.

Sony now finds itself in a double bind, and one that it may not be able to get out of. Sales of the PS3 are slow and may not improve, and its is making less money on each unit.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.

Posted on: July 9, 2007 – 4:09 am in Uncategorized, , , , ,

Another Missed Chance For Sony (SNE) PS3

After almost every analyst that follows the gaming industry said Sony (SNE) would cut prices on it PS3 game platform, the company’s president said "no dice." Reuters reports that there may just be too much cost built into the unit with its Blu-ray optical disk and other gadgets.

Sony management may have forgotten to check the sales figures. Last month the PS3 was outsold by Nintendo’s Wii by a factor of 6 to 1. Numbers in other large countries tell the story. Sony may hope that a number of new games coming to market for its platform will stimulate demand for the product, but its high cost continues to keep customers away.

And, that is not going to stop.

Douglas A. McIntyre

Posted on: July 6, 2007 – 9:00 am in Uncategorized, , , ,

Nintendo Guidance Shows More Muscle

Nintendo raised its guidance again for the year ended March 31.  It won’t post the actual results until the end of April, but its Wii and DS systems have been hits for the company.  It mostly attributed the DS handheld system for the success.  The sales are being estimated now at 966 Billion Yen (US$8.1 Billion) compared to previous forecasts of 900 Billion Yen and estimates of 930 Billion Yen.  Back in January it already forecast that profits would be a record.

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Posted on: April 5, 2007 – 7:26 am in Video Games, , , , , , , , ,