Videogame companies have enjoyed something of a renaissance because of the pandemic—kids and grown-ups both stuck at home for weeks, sometimes months—and their stock prices have reflected it.
By way of example, one analyst, Cowen’s Doug Creutz, estimates the sector’s market value has doubled. But as economies worldwide reopen, investors have turned skittish about the prospects for videogames.
A central question, or maybe the central question, is how many of the stay-at-home players will stick around once they have lots of other entertainment options. Creutz put it succinctly: Videogame stocks are not a reopening play and the worries about comparisons to last year’s-blockbuster second quarter are real.
Inevitably, there will be some shift in consumer behavior. The question for the major publishers that report this week: How much?
Here’s what to expect:
Expect a steady-as-she-goes quarter when Activision (ATVI) reports its second-quarter results after the closing bell Tuesday. No huge launches, and the steady drumbeat of profit from Call of Duty and other franchises will likely drive its estimated earnings of 75 cents on an adjusted bases, and bookings of $1.9 billion.
But the company has a concern. Last month, a lawsuit filed by the California’s fair employment and housing accused the company of harassing and discriminating against its female employees. Its share price has declined 9.2% in the last two weeks. The embattled chief executive, Bobby Kotick, responded in a public letter.
“We are taking swift action to be the compassionate, caring company you came to work for and to ensure a safe environment,” he wrote. “There is no place anywhere at our company for discrimination, harassment, or unequal treatment of any kind.”
(EA) brings up the rear in posting its numbers—Wednesday after the closing bell. Wall Street is modeling earnings of 62 cents a share on an adjusted basis, and bookings of $1.3 billion.
For EA, future expectations are largely built around two new titles, Battlefield 2042 and FIFA 22, both set to launch in October. But, Creutz wrote that since FIFA launches Oct. 1, and the quarter ends Oct. 2, he pulled back estimates. In the past, FIFA has launched earlier—in September, giving more of a boost to the third quarter than this year is likely to see.
EA also announced the acquisition of Playdemic in June, a mobile developer known for golf games, and Cruetz wrote that the company wasn’t clear whether the deal would be included in the third-quarter guidance.
Write to Max A. Cherney at firstname.lastname@example.org
Read More:Videogame Earnings Are Out This Week. What to Expect.