What Could These Three Gaming Companies Do for You?

Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The global value of the game software industry is estimated to reach $62.4 billion in 2016, a surge of 62.6% from 2011. Global video gaming totals almost 3 billion hours each week. Gaming software companies are continuously launching new games to attract gamers. They are also diversifying their games onto new platforms including smartphones, tablets, and more. Here is an analysis of the investment opportunities present in three companies’ new game launches.

Growing with Call of Duty and Destiny

Activision Blizzard (NASDAQ: ATVI) is planning to publish a new shooter game called Destiny in the first half of 2014. This game will be played online as a first person prospective. It is a highly social game, as players can make new friends over the web outside their current friend list. The option of online gameplay will help avoid pushing traffic toward competitors. It can be played on various other platforms such as PlayStation and Xbox, and it’s highly social nature is expected to create demand of more than 15 million units annually. Destiny is predicted to generate revenue of $400 million by the end of 2014.

Call of Duty, the company’s highest-selling game last year, has sold 20 million copies around the world. With the success of this game franchise, the company will launch the next-generation Call of Duty: Ghosts on Nov. 5, 2013. The game will feature a new game engine with an all new world and characters. This engine will deliver better graphics and innovation throughout the entire game to avoid the monotony of previous games. It will also include new multiplayer features, which will likely increase demand in the future. The new game is expected to generate revenue of $1.04 billion by the end of this year.

Brazil FIFA World Cup to kick up the revenue

Electronic Arts' (NASDAQ: EA) mobile segment reported revenue of $370 million in fiscal year 2013, up by 30% year-over-year. According to Trefis, smartphone and tablet users are expected to grow at a compound annual growth rate of 20% from 2012 to 2016. With an increasing user base of smartphones, the company plans to monetize the opportunity by launching 11 new games for the smartphone platform in fiscal year 2014. These games will be available on both the iOS and Android platforms. With the launches, EA's mobile segment revenue will further increase to $470 million in the fiscal year 2014.

Brazil is the home country of many soccer talents and is honored by soccer fans around the world. The 2014 World Cup in Brazil will act as a major facilitator for the company’s "FIFA" franchise of soccer games. The company’s most recent installment in the "FIFA" franchise, FIFA 13, sold over 14.5 million units. This was up 30% year-over-year and added $850 million to the company's total revenue in the 2013 fiscal year. This segment contributed 24% of the company’s total revenue. Now the company is planning to launch a new installment, FIFA Brazil World Cup 2014, in April 2014. It is expected to generate revenue of $660 million in the first quarter of fiscal year 2015 with the sale of over 3 million units.

Games upgrade will lift the revenue

Konami’s (NYSE: KNM) "Pachinko" and "Pachislot" slot machine manufacturer revenue declined to $57.7 million in fiscal year 2013, down from $193.7 million the previous year. The decline was due to the delayed release of its new slot machine products. The company will likely recover in the coming fiscal year with the release of an upgraded version of Rumble Roses 3D. The new product will feature a 3D liquid crystal display which can be used without 3D glasses, allowing customers to play in 3D with the naked eye. This game has seen the huge demand worldwide, and the upgraded version will bring an upsurge of $200 million to this segment in the 2014 fiscal year.

The company has also been developing and releasing games in the "Metal Gear" franchise since 1987. "Metal Gear" is a series of adventure games which are played on personal computers and home consoles. With the rising demand for on-the-go games, a new entry in the franchise known as Metal Gear Solid Ops was released for smartphone users earlier this year. This is a 3D game which was released for iOS and Android users. It generated additional revenue of $3.2 million in fiscal year 2013, and will generate $9.43 million by the end of fiscal year 2014.

Investor takeaway

Activision Blizzard's publishing of a new social game and the next generation of the "Call of Duty" franchise will generate new revenues for the company.

Electronic Arts will capitalize on the launch of FIFA Brazil World Cup 2014. In addition, it will also launch new games for smartphone users which will increase the company's revenue.

Konami has a long history of successfully launching games in the "Metal Gear" series and upgrading their existing slot machines. This will create more demand in the future, which is beneficial for investors.

Looking at the potential of all the companies, I recommend a buy for all three stocks.

While Activision and Microsoft have been taking the headlines when it comes to console gaming, Fools following the gaming sector would do well to also keep tabs on Electronic Arts. The Motley Fool's new special report breaks down the risks and opportunities facing the company to help you decide if EA is right for your portfolio. Click here to get your copy now.

 


Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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