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Take-Two, Activision Pushes Videogame ETF Higher

Take-Two Interactive Software TTWO was the star performer in yesterday’s trading session, jumping 10.6% and hitting a record high. Investors thronged the videogame publisher after its solid fiscal second-quarter 2018 results, which buoyed up on strong bookings of $577 million. It easily topped the Zacks Consensus Estimate of $516.9 million and was up 20% year over year (read: 5 Red Hot Tech Stocks That Sent S&P 500 ETF Higher).

Continued strength in games like Grand Theft Auto V, Grand Theft Auto Online, NBA 2K17& 2K18, Monster Legends and XCOM 2 is the major reason for the outperformance and their demand will continue in the holiday season. As such, the company expects net bookings for the fiscal third quarter to be in the band of $610-$660 million. It lifted its full-year booking guidance to $1.93-$2.03 billion from $1.65-$1.75 billion. Impressed with the powerful game business, nine Wall Street firms raised their price target following the results.

Activision Blizzard ATVI also rose 5.9% on the day on a strong debut of the Call of Duty: WWII game over the weekend. The company sold more than $500 million Call of Duty: WWII  worldwide in its first three days of sales, double the units sold in its opening weekend last year.  

The dual news has spread bullishness in the entire videogame industry, sparking a rally in other videogame stocks. Glu Mobile Inc. GLUU climbed 8% while Electronic Arts Inc. EA and Nintendo Co NTDOY were each up 2.2% at the close. Soaring prices led to smooth trading in the ETF world and The ETFMG Video Game Tech ETF (GAMR) gained 2.3% (read: 7 Top-Ranked Tech ETFs on Unstoppable Rally).

GAMR in Focus

This is the first ETF targeting the global video game industry of the technology sector including game developers, console and chip manufacturers, and game retailers. It was introduced in March 2016 and has garnered $43.7 million in AUM. The ETF follows the EEFund Video Game Tech Index, holding 45 securities in its basket, with none holding more than 5.25% of the assets.

American firms take the top spot at 36% while Japanese and South Korean firms round off the top three at 26% and 16%, respectively. While large caps account for 42% share, mid caps make up for 31% share and the rest goes to small caps. Expense ratio comes in at 0.75%.

The product is up 57.1% in the year-to-date time frame and is easily crushing the ultra-popular Select Sector SPDR Technology ETF XLK by a wide margin. XLK has gained 33.9% so far this year (read: 5 Overlooked Tech ETFs Crushing XLK).

Strong Growth Ahead

With technologies like virtual and augmented reality coming into play, the industry will likely continue to outperform. This corner of the market represents one of the few growth opportunities left for the developed market investors.

According to market research firm Newzoo, the global video game market is expected to cross the $1000 billion mark this year and will rise to $128.5 billion in 2020. Most of the growth will likely come from the huge appetite for online and mobile content of mainland China’s more than half-a-billion gamers. Increased enthusiasm among millennials will further add to the strength as video games are emerging as the world’s favorite pastime (see: all the Technology ETFs here).

With the holiday season around the corner, the industry has been pushing up the title lineup with a novel approach or by upgrading the existing ones. Growing demand for smartphones and tablets, global broadband expansion, shift to digital media, and eSports continue to fuel growth.

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SPDR-TECH SELS (XLK): ETF Research Reports
 
Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
 
Take-Two Interactive Software, Inc. (TTWO): Free Stock Analysis Report
 
Electronic Arts Inc. (EA): Free Stock Analysis Report
 
Nintendo Co. (NTDOY): Free Stock Analysis Report
 
Glu Mobile Inc. (GLUU): Free Stock Analysis Report
 
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