New “God of War” and “Sonic” titles out this week
“Game On” is The Fly’s weekly recap of the stories powering up or beating down video game stocks.
NEW RELEASES:
This week’s biggest release is Sony’s (SONY) “God of War: Ragnarok,” an action adventure title that will launch on PlayStation 4 and PlayStation 5 on November 9. Also out this week is Sega’s (SGAMY) 3D platformer “Sonic Frontiers,” which rolls out for Switch (NTDOY), PS4, PS5, PC, Xbox One (MSFT), and Xbox Series X/S on November 8.
NPD Q3:
According to the Q3 2022 Games Market Dynamics: U.S. report from The NPD Group, consumer spending on video gaming in the U.S. totaled $12.34B in the third quarter of 2022, a decline of 5% when compared to Q3 2021. Non-mobile subscription content and video game hardware spending were among the quarter’s growth categories but were unable to offset declines experienced across other segments. Console and portable content contributed most to the overall drop in spending. Data from Sensor Tower shows U.S. consumer spending in mobile games during the first quarter fell 9% from Q3 2021. Overall content spending in Q3 reached $10.64B, a 7% decrease over Q3 2021. Hardware increased 16% and accessories declined 12%. PlayStation 5 led video game hardware in both unit and dollar sales in Q3 of this year.
ACTIVISION:
The European Commission said Tuesday it has opened an in-depth investigation to assess the proposed acquisition of Activision Blizzard (ATVI) by Microsoft under the EU Merger Regulation. The Commission is concerned that the proposed acquisition “may reduce competition in the markets for the distribution of console and personal computers video games and for PC operating systems.” The Commission’s preliminary investigation shows that the transaction “may significantly reduce competition on the markets for the distribution of console and PC video games, including multigame subscription services and/or cloud game streaming services, and for PC operating systems.” The Commission is concerned that, by acquiring Activision Blizzard, Microsoft may foreclose access to Activision’s console and PC video games, especially to “high-profile and highly successful games” such as “Call of Duty.”
The announcement from the Commission comes after Activision Blizzard reported better-than-expected Q3 earnings and revenue this week. In addition, the game maker said Monday that “Call of Duty: Modern Warfare II” continues to smash franchise records as the new blockbuster has crossed $1B in worldwide sell-through following the first 10 days from its release on October 28, 2022. The new mark tops the previous franchise record of 15 days set in 2012 by “Black Ops II.” Player engagement continues to soar as “Modern Warfare II” players already have played more than 200M hours and over 1B matches across PlayStation, Xbox and PC platforms in the first 10 days following its release on October 28, the company noted.
TAKE-TWO:
Yesterday, Take-Two (TTWO) reported that Q2 net bookings grew 53% year-over-year, but still fell short of Wall Street estimates. “We posted another consecutive quarter of solid results, with Net Bookings of $1.5B, underscoring our ability to launch exciting new games and content updates across our portfolio,” the company said. “We continue to make excellent progress with our integration of Zynga, and we remain highly optimistic about the vast, long-term growth potential for the mobile industry, which is expected to reach over $160B in gross bookings within the next four years.” Looking ahead, Take-Two provided upbeat Q3 net bookings outlook but lowered its FY23 net bookings outlook.
Following the report’s release, no fewer than eight analysts cut their price target on Take-Two, with Wedbush’s Michael Pachter saying the slowdown in mobile gaming resulted in financial results that fell slightly below consensus. Meanwhile, BofA analyst Omar Dessouky upgraded Take-Two to Buy from Neutral, saying he thinks the shares now offer “a margin of safety” that alleviates the risk of “GTA 6” being pushed out beyond FY25.
EA:
Last week, Electronic Arts (EA) reported downbeat Q2 earnings and net bookings but noted that “FIFA 23” unit sell-through was up 10% year-over-year after its first four weeks of availability, with Ultimate Team players up 6% on the comparable period for “FIFA 22.” Looking ahead, EA provided conservative Q3 net bookings guidance but raised its earnings outlook for FY23.
In response to the results, Wedbush’s Michael Pachter cut his price target on the shares, while Deutsche Bank analyst Benjamin Soff also cut his price target but noted that EA remains a top pick in the sector. The company has strong underlying growth for its core franchises, a “fairly robust” release slate for the balance of fiscal 2023 and an “underappreciated multiyear development pipeline,” Soff told investors in a research note. Soff added that the shares are trading at an attractive valuation, near the low end of its recent historical range.
NINTENDO:
Nintendo reported year-over-year gains in H1 operating profit, profit per share, and revenue, though noted that Switch unit sales fell during the period to 6.68M from 8.28M last year. Looking ahead, Nintendo raised its FY23 revenue and net profit guidance but cut its Switch hardware sales outlook to 19M units from 21M units.
Of note, the company said that each new title it released during the first half of the year has “sold well,” with “Splatoon 3” selling 7.6M units, “Nintendo Switch Sports” at 6.15M units, “Mario Strikers: Battle League” at 2.17M units, and “Xenoblade Chronicles 3” at 1.72M. In addition, Nintendo saw “stable” sales in titles release through the end of previous fiscal years, with “Mario Kart 8 Deluxe” selling 3.07M units and “Kirby and the Forgotten Land” selling 2.61M units during the period.
OTHER STORIES TO WATCH
- Sony’s PlayStation VR2 launches February 22, 2023 at $549.99 [more]
- Netflix (NFLX) will adapt Microsoft’s “Gears of War” game franchise into a feature film and animated series [more]
- Xbox Game Studios head Matt Booty said “Grounded” has surpassed 13M players, VGChartz reports [more]
- Capcom (CCOEY) and Tencent (TCEHY) are working on a mobile “Monster Hunter” game, VGC says [more]
- Ubisoft (UBSFY) said that its upcoming “Prince of Persia: The Sands of Time” remake has not been cancelled [more]
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Originally Posted November 8, 2022 – What You Missed This Week in Video Games
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