From Sara Salinas:
- EA cited “intense competition” in the space as contributing to a revenue miss.
- Take-Two Interactive, which reported quarterly earnings Wednesday morning, posted a big miss on earnings per share.
- Both companies are keeping an eye on threats from free-to-play games like “Fortnite.”
Video game stocks are getting killed Wednesday after two of the top companies in the space reported quarterly earnings.
Shares of EA EA tanked 14 percent in early trading Wednesday, a day after the company cited “intense competition” in the space as contributing to a revenue miss for its fiscal third quarter of 2019.
Take-Two Interactive TTWO, which reported quarterly earnings Wednesday morning, posted a big miss on earnings per share. The stock is nearly 8 percent down.
The reports appeared to drag Activision Blizzard ATVI lower as well. The company doesn’t report its quarterly earnings until next week, but the stock fell roughly 7 percent Wednesday.
EA’s Chief Executive Andrew Wilson said heightened competition in the gaming space dented the company’s sales during the quarter. Gaming companies are seeing a particular threat from free-to-play games like the wildly popular “Fortnite.”
“Our [Battlefield V] launch didn’t resonate as strongly as we would have liked it to with players, and we were never truly able to catch up,” Wilson said on the company’s earnings call Tuesday. “And as our competitors continued to build momentum, whether that was ‘Fortnite’ or ‘Red Dead Redemption 2’ or ‘Call of Duty,’ we continued to stall from where we needed to be.”
Take-Two, for its part, said its title launches outperformed expectations. In October, the company launched “Red Dead Redemption 2,” which it says sold more units in the first eight days than the original title sold in its first eight years.
The company is still keeping an eye on threats from free-to-play games like “Fortnite,” though.
“In terms of a console title being made available free-to-play. Remember that ‘Fortnite’ came about in a roundabout way,” CEO Strauss Zelnick said on the company’s earnings call. “I think that’s sort of a standalone experience. I think it’s hard to replicate and it would probably be ill-advised to try to replicate it. … I’m not worried at all about someone else establishing a free-to-play approach.”
The ETFMG Video Game Tech ETF (GAMR) was trading at $41.96 per share on Wednesday afternoon, down $0.86 (-2.01%). Year-to-date, GAMR has declined -12.44%, versus a 2.53% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Yahoo Finance.