Video Game Earnings Mostly Upbeat: ETFs in Focus

Sanghamitra Saha

August 13, 2020 at 2:30 PM·5 min read

The video game industry is stealing the thunder of traditional media and entertainment thanks to the coronavirus pandemic. The pandemic continues to buoy the video games industry as people are increasingly engaging in modes of in-house entertainment.

According to a report by NPD Group, the industry, including hardware, software, accessories and game cards, saw a 26% year-over-year rise in consumer spending to $1.2 billion in June (highest-tracked spending for the month of June since 2009) per a GameDaily article (read: Video Gaming ETFs to Keep Soaring Amid Coronavirus Crisis).

Against this backdrop, it is intriguing to have a look at the earnings reports of the key players. Electronic Arts EA reported earnings in late July, Activision Blizzard Inc. ATVI and Take Two Interactive Software TTWO came up with their results in early August while Zynga ZNGA reported recently.

Earnings have been favorable in the industry. The stocks have considerable weight in funds like Global X Video Games & Esports ETF (HERO) and VanEck Vectors Video Gaming and eSports ETF ESPO.Both funds added about 5.9% and 3.7% in the past 10 days (as of Aug 12, 2020).

Inside EA Earnings

Electronic Arts reported first-quarter fiscal 2021 earnings of $1.25 per share, which declined 73.7% year over year. Revenues however rose 20.7% year over year to $1.45 billion. At the beginning of fiscal 2021, EA changed the way in which it reports net bookings. Periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes.

Net bookings increased 77.7% year over year to $1.39 billion. The Zacks Consensus Estimate for earnings and revenues was pegged at 82 cents per share and $1.07 billion, respectively.EA’s full game revenues (24.6% of total revenues) grew 37% year over year to $359 million. Net bookings from full games increased 202% year over year to $287 million.

Moreover, live services and other revenues (75.4% of total revenues) rose 16.2% year over year to $1.1 billion. Net bookings from live services increased 61% year over year to $1.1 billion. Further segregating full-game revenues, full-game download revenues increased 68% year over year to $233 million. Revenues from packaged goods increased 5% year over year to $136 million.

Inside ATVI Earnings

The company reported second-quarter 2020 non-GAAP earnings of 81 cents per share, up 52.8% year over year. Consolidated revenues rose 74.4% year over year to $2.0 billion. Adjusting for the net effect from the recognition of deferred revenues and the elimination of intersegment revenues, total revenues rose 38.4% to $1.93 billion. The Zacks Consensus Estimate for earnings and revenues was 68 cents per share and $1.69 billion, respectively.

Activision Blizzard also witnessed a rise in Monthly Active Users (MAUs) during the quarter ended Jun 30, 2020. Overall MAUs came in at 428 million in comparison with 327 million as of Jun 30, 2019. The company’s net bookings also rose 72.2% year over year to $2.08 billion. Net bookings from digital channels were $1.82 billion, up 80.2% year over year. Notably, in-game net bookings were $1.37 billion, up 76.6% year over year.

Inside TTWO Earnings

The company reported first-quarter fiscal 2021 GAAP earnings of 77 cents per share, up 87.8% year over year. Non-GAAP earnings were $2.68 per share. Net revenues increased more than 50% from the year-ago quarter to $996.2 million. The top line was driven by heightened user engagement levels and net bookings growth attributed to the coronavirus-led lockdown.

Grand Theft Auto (GTA) Online and GTA V, NBA 2K20, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization VI, Social Point’s mobile offerings, the WWE series and The Outer Worlds were the biggest contributors to the company’s first-quarter fiscal 2021 top-line growth. Recurrent consumer spending increased 52% and accounted for 58% of total GAAP net revenues. The Zacks Consensus Estimate for earnings and revenues was $1.58 per share and $823 million, respectively.

Inside Zynga Earnings

The company reported second-quarter 2020 loss of 16 cents per share, wider than the loss of 6 cents reported in the year-ago period. Meanwhile, revenues rose 56.9% year over year to $452 million, on support from live services and robust growth in global markets. The Zacks Consensus Estimate for earnings and revenues was 8 cents per share and $503 million, respectively (read: Can Zynga ETFs Shine on Q2 Results Amid Rising Online Gaming?).

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Click to get this free report Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report TakeTwo Interactive Software, Inc. (TTWO) : Free Stock Analysis Report Electronic Arts Inc. (EA) : Free Stock Analysis Report Global X Video Games Esports ETF (HERO): ETF Research Reports Zynga Inc. (ZNGA) : Free Stock Analysis Report VanEck Vectors Video Gaming and eSports ETF (ESPO): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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