Weak first half for videogames set to give way to new games - Berenberg
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Earnings for videogame names have seen weak momentum for months, due to some tougher comparisons and a more spare release slate of new games recently - but that may be getting ready to turn around, Berenberg says.
The second half is a good opportunity for some companies to turn that around with catalysts, analyst Edward James says.
Market revenues overall fell in the first half by about 10% year-over-year, James noted - the first such drop in the past 20 years. And while a lot of discussion has centered on the macro economy, a "dearth of new game content" has played at least as big a part, he said.
Meanwhile, there's a "clear acceleration" ahead as almost all covered companies have major titles set for the second half and 2023 - signaling a return to positive low-single-digit growth for the rest of 2022, and some more normal mid-single-digit growth from 2023 on.
The firm tracked about 58 game releases in the first half, and expect nearly 80 in the second half - and restricting that view to "major" releases, there were only eight in the first half, vs. an expected 24 in the second half.
Who's likely to see momentum support from a stronger slate? Electronic Arts (NASDAQ:EA), Frontier Developments, Nacon, Team17 (OTC:TSVNF) and tinyBuild (NASDAQ:NTES) get singled out by Berenberg.
The firm notes that Keywords Studios (OTCPK:KYYWY) and Stillfront (OTCPK:STLFF) don't have game-specific catalysts, but should still see momentum from trading or current trends. And Focus Entertainment has a strong release pipeline but is still facing some recent development challenges.
On the flip side, few catalysts are in store for those with a weaker slate: Devolver, Ubisoft (OTCPK:UBSFY) and CD Projekt (OTCPK:OTGLY), all of which the firm rates Hold. And regardless of slate, after looking at the past four quarters, it notes Activision Blizzard (ATVI) is in a clear downgrade cycle.
Industry sales fell 13% in the second quarter, led down by a slump in mobile gaming.