As the Q1 earnings season wraps, let’s dig into this quarter’s best and worst performers in the video gaming industry, including Electronic Arts (NASDAQ:EA) and its peers.
Since videogames were invented in the 1970s, they have gradually taken more share of entertainment time. Ubiquitous mobile devices have powered a surge in “snackable” games that can be played on the go. Over time, games have developed more social engagement features where friends can play games together over the internet. The business models of games publishers have become less volatile due to digitization of distribution, in game monetization, and like Hollywood, an increasing dependence on surefire hit franchises. Covid driven lockdowns accelerated adoption and usage of videogames – a trend that has not slowed.
The 4 video gaming stocks we track reported a mixed Q1. As a group, revenues beat analysts’ consensus estimates by 4.9% while next quarter’s revenue guidance was 0.8% above.
Luckily, video gaming stocks have performed well with share prices up 11.4% on average since the latest earnings results.
Electronic Arts (NASDAQ:EA)
Best known for its Madden NFL and FIFA sports franchises, Electronic Arts (NASDAQ:EA) is one of the world’s largest video game publishers.
Electronic Arts reported revenues of $1.90 billion, up 6.5% year on year. This print exceeded analysts’ expectations by 7.6%. Overall, it was a satisfactory quarter for the company with EPS guidance for next quarter exceeding analysts’ expectations.
Electronic Arts Total Revenue
Electronic Arts achieved the highest full-year guidance raise of the whole group. Even though it had a relatively good quarter, the market seems discontent with the results. The stock is down 26.9% since reporting and currently trades at $151.95.
Taking a new twist at video gaming, Skillz (NYSE:SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.
Skillz reported revenues of $22.41 million, down 11.2% year on year, outperforming analysts’ expectations by 8%. The business had an exceptional quarter with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ number of paying monthly active users estimates.
Skillz Total Revenue
Skillz achieved the biggest analyst estimates beat among its peers. The company reported 124,000 monthly active users, up 2.5% year on year. The market seems happy with the results as the stock is up 26.9% since reporting. It currently trades at $6.70.
Best known for its Grand Theft Auto and NBA 2K franchises, Take Two (NASDAQ:TTWO) is one of the world’s largest video game publishers.
Take-Two reported revenues of $1.58 billion, up 13.1% year on year, exceeding analysts’ expectations by 0.9%. Still, it was a slower quarter as it posted full-year EBITDA guidance missing analysts’ expectations.
Take-Two delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 1.5% since the results and currently trades at $229.08.
Best known for its wide assortment of user-generated content, Roblox (NYSE:RBLX) is an online gaming platform and game creation system.
Roblox reported revenues of $1.04 billion, up 29.2% year on year. This result topped analysts’ expectations by 3.3%. Zooming out, it was a slower quarter as it produced full-year EBITDA guidance missing analysts’ expectations.
Roblox delivered the fastest revenue growth among its peers. The company reported 97.8 million daily active users, up 25.9% year on year. The stock is up 21.9% since reporting and currently trades at $81.65.
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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