People still play video games a lot, but how many?


Video game publishers predict their industry’s pandemic-fueled turbocharging is here to stay, but engagement is slowing down and hurting their inventory.

At the start of the earnings season, Wall Street knew comparisons to last year would be difficult. The April-June quarter surpassed the first full calendar quarter of pandemic stay-at-home mandates, when demand for video games skyrocketed as it served as the premier option for online entertainment and socializing, being given that the medium has become a gathering place for millions if not billions around the world.

While results were still strong, forecasts for many companies caused consternation as they showed at least a plateau for the video game boom, and stocks as a whole fell.

The area that still appears to be the most volatile is mobile gaming, as two of the biggest names in mobile gaming are heading in different directions. Mobile is the fastest growing segment in the nearly $ 200 billion video game market, and results showed that with more outdoor options open, gamers will always have their phones on. them, but confidence in the future is not universal.

Zynga Inc. ZNGA,
caused a lot of confusion with its Thursday report, making publishers the worst off as stocks plunged more than 15% on disappointing outlook and reservations in an otherwise decent earnings report. Cowen analyst Doug Creutz probably summed up the week best in a note titled “We almost ended the earnings season with no disappointment … almost.”

“[Zynga] Management said they saw a slowdown in demand in the second half of the quarter, ”Creutz said. had a greater pace, it was strongly motivated by a real upside surprise to the unit of a new launch title.

However, Playtika Holding Corp. PLTK,
+ 0.52%
posted profit relative to loss in the quarter of last year – slightly below Street’s estimates though – while revenues exceeded estimates. The Israel-based mobile game developer, which went public in January, is considered a top pick by Cowen’s Creutz because it said titles like “Bingo Blitz” and “Solitaire Grand Harvest” are showing stronger growth than anything else. in the Zynga catalog. Playtika shares had the best week, rising 13%.

The consensus for the week’s results was that engagement in video games had slowed down a bit, but had plateaued and should stay strong.

“Twitch data also suggests a slowdown in gaming engagement in the second half of Q2,” Creutz wrote. “However, the same data also suggests that engagement in games leveled off in July, which is consistent with the guides we’ve seen this week from ATVI / EA / TTWO / PLTK.”

While a lot of spotlight on Activision Blizzard Inc.’s ATVI,
+ 2.63%
Tuesday’s earnings report was about how the company was dealing with accusations of gender inequality and harassment, the results exceeded Wall Street estimates, but not the earnings and bookings outlook for the company. whole year. Despite this, stocks were relatively unscathed, closing 1.4% lower for the week.

Activision Blizzard said the mobile version of its “Call of Duty” franchise was on track to surpass $ 1 billion in consumer spending on the year, and that mobile overall accounted for 40% of bookings in the world. business in the quarter. The company’s King segment, with its flagship game “Candy Crush” and other mobile titles, accounted for 28% of revenue.

Take-Two Interactive Software Inc. TTWO,
+ 0.97%
shares fell 8.7% for the week following the release of its results on Monday. The company’s report suffered from an unchanged outlook for the year, as analysts expected an increase, following news that the release of two of its game titles would be delayed.

Likewise, Take-Two is expanding its mobile offerings with its recent acquisitions of Socialpoint, Playdots and now Nordeus. The company noted that its title “WWE SuperCard” is the leading mobile game on its 2K label with more than 24 million downloads.

Read: Gamers Spent Billions More On Video Games During Pandemic, And Businesses Are Looking For More

Electronic Arts Inc. EA,
shares fell 5.3% the week after beating earnings, but offering mixed prospects in its report on Wednesday, where current quarter earnings exceeded Street’s estimates, but not its forecast for the year complete.

EA’s mobile revenue grew 8% to $ 218 million, while overall revenue rose 6% to $ 1.55 billion. The company has said that “the focus on mobile” for making games is one of its long-term priorities going forward. Mobile is an “important part” of the company’s live services, which cover all of its gaming categories and account for nearly 80% of EA’s revenue.

Over the past 12 months, Activision Blizzard shares are down 5%, Take-Two’s by almost 11%, EA’s by 7%, Zynga’s by almost 20%, and Playtika’s by 7%. % of their January IPO price. . In comparison, the S&P 500 SPX index,
+ 0.17%
is up 32% and the IGV IGV Expanded Tech-Software Sector ETF,
is up 35%.

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