Financial Associated Press (Shanghai, editor Shi Zhengcheng) news, the game sector is not the permanent focus of the earnings season, but this spring is very different.
After the story of the "metacosm" successfully aroused the interest of the world's capital markets, the industry giants with heavy gold blew off the concept and began to perform "banknote capability". On January 10, Take-Two spent $12.7 billion to acquire mobile game maker Zynga, becoming the largest acquisition in the history of the game industry. But that record lasted only 10 days before it was ruthlessly surpassed by Microsoft's $68.7 billion acquisition of Activision Blizzard.
With the start of a new round of earnings season, game companies that are already good at "storytelling" will lead the capital market to rhapsody, what issues deserve investors' special attention?
Watch point 1: FAANMG collective end to explore the next ten billion acquisition
For companies on the gaming track, this quarter's earnings season certainly doesn't escape analysts asking: Do you have any plans to buy, or are you ready to be acquired? Especially after Microsoft paid a year of net profit to acquire Activision Blizzard, the imagination of this problem is also suddenly clear: in theory, except for several Internet giant platforms, any game company may become the target of acquisition.
(Global Game Stock Market Value Ranking, Source: CompaniesMarketCap)
In addition to Microsoft, Sony, Tencent and other companies that have long invested in the game field, other giants have also increased their investment in the game industry in recent years, which will also be reflected in the financial reports in the past two weeks. For example, at the Netflix earnings report conference last week, CEO Reed Hastings shouted the slogan of "owning the best game in the industry".
In addition to the direct impact of Microsoft's huge acquisition on Xbox competitor Sony, Google (february 1 after hours earnings) and Meta (February 2) that are also in the AR/VR track are also eager to wait and see. Logically, if there is no "hard enough" AR/VR product, no amount of IP is useful. After the holiday season's Oculus VR glasses gift craze, Meta does have an incentive to share specific sales figures with the outside world, at least in the name of the meta-universe concept stock.
For Google and Apple (Jan. 27), the focus is more on acquisitions. Google's Stadia game platform has been affected by the lack of exclusive games after the closure of self-developed studio SG&E, and Apple's emphasis on software services in recent years and potential AR/VR products also need content-level escort. At a 50% premium to Microsoft's acquisition of Activision Blizzard, if Electronic Arts (EA) or Take-Two were on the shelves, it would naturally be a multi-billion dollar deal.
Amazon (February 3) faces a more complex problem. Although the company set up a game studio as early as 2012, it worked for so many years until 2021 with the massively multiplayer online role-playing game "New World". To the embarrassment of the retail giant, according to Steam data, as of the beginning of January this year, the number of people online at the same time of New World has fallen to less than 100,000 from its peak of 900,000 after it went online in September last year.
In addition to the rapid cooling of popular games, the internal data leakage incident of Twitch, Amazon's game live broadcasting platform at the end of last year, also showed that Amazon intends to launch a digital game platform that benchmarks Steam, combined with the company's previous application for a patent for "one-click purchase of games when watching the live broadcast of the host", if Amazon intends to challenge the field of Steam and Epic Games, it is difficult to say that it is surprising.
Outside the U.S., in addition to Tencent, which is busy clarifying investment relationships, Sony (February 2) is the giant platform with the most incentive to carry out mergers and acquisitions. After Microsoft's acquisition of Activision Blizzard, Sony representatives told the media that they believe Microsoft will abide by the terms of the contract and continue to ensure that Activision's games (mainly referring to the Call of Duty series) can run on multiple platforms. But the phrase also leaves a message: What happens when Sony and Activision's contract expires? Compared with American companies, Sony's biggest advantage is that it has a close relationship with the Japanese industry, and there are many game giants with well-known IP in the local area.
(Spring Universal Game Stock Earnings Report Expected Release Time, Source: Company's official website)
Watch point two: 2022 is expected to be listed in a concentrated manner Fundamental factors are expected to play a leading role
For game companies, acquisition news is more of an unpredictable one-time stimulus, but doing a good job of the game itself is the key source of performance. For example, The American Electronic Arts (EA) launched the chicken-eating game Apex Heroes during the 2019 Chinese Lunar New Year Festival, which was widely acclaimed, and in just three days, it experienced a 14% drop in earnings reports that fell short of expectations, and rose 21% after announcing that the number of people online exceeded 10 million.
Another less glamorous example is CD Projekt RED, where bursting revenue data pushed the company's stock price to 400 PLN at one point before the hit "Cyberpunk 2077" was released in late 2020. But with serious development problems with the game itself, the heat of the capital market quickly dissipated, and the company's stock price remained low for the past year.
(CD Projekt RED Daily Chart, Source: marketwatch)
For game manufacturers, due to the countless project tickets caused by the epidemic in the past two years, 2022 and even 2023 will become the time when popular works will appear together. Under the hot wind of keen to reproduce old IP in recent years, well-known IP such as Pokémon, Total War, Horizon, GT Racing and so on will usher in the latest works in the first quarter, in addition to promoting game sales revenue, it also has a strong role in promoting the sales of console platforms such as PS5 and SWITCH.
(Release time of popular game works of some listed companies, source: IGN, Kotaku, Financial Associated Press)
In the acquisition of the battlefield of Microsoft, which frantically exerts its "banknote ability", its ZeniMax/B company also has a number of AAA works online, of which the widely anticipated B society science fiction work "Starry Sky" is exclusive to the Microsoft platform, and the only uncertainty is whether it can be listed in time for the year.
Watch point 3: When will the "first stock of the metacostem" stop falling?
It is worth mentioning that there is also a very obvious uneasiness in the earnings period of this wave of game stocks - Robles can not fall anymore. Since the end of November last year, it has weakened all the way after hitting a record high after listing, and coupled with factors such as the decline in operational data, the cumulative decline in stock prices from highs has exceeded 50%.
(Robles Daily Chart, Source: TradingView)
If the Feb. 15 earnings report continues to show users losing interest in the so-called "metacosm," it won't be good news for stocks that are attached to the entire concept. At present, the market is expected to achieve revenue of $767 million (+147% year-on-year) in Q4, but the adjusted EPS loss margin will continue to expand by 27%.
Compared with the impact of high revenue growth and profit trends on stock prices depending on market preferences, real operating data is more likely to trigger large-scale fluctuations. The gap in the company's share price in mid-December was due to the fact that the November operating data disclosed at that time was significantly weaker than before the October server failure, prompting investors to worry about the overall weakening of the data throughout the fourth quarter.
In the context of the continuous weakening of the stock price, there have also been voices in the market that "expelled Robles from the meta-universe", emphasizing that the company is more like a platform for children to play creative and has nothing to do with cutting-edge technology.