Midday Report: Shares of Video Game Makers Soar Amid Sluggish Sales

Sales of video games and consoles have been sluggish, but shares of the game makers are soaring.

The research group NPD reports that domestic sales of video games by retailers fell nearly 10 percent in the first-quarter.

But investors are overlooking some middling performance and focusing on what they hope will be an exciting future.

So far this year, shares of Activision Blizzard (ATVI) and Take-Two Interactive (TTWO) have both soared by more than 40 percent. Industry leader Electronic Arts (EA) is up 24 percent.

And retailer Gamestop (GME) has beat them all, up 49 percent since the beginning of the year.

Electronic Arts and Activision will report first quarter results this week, and analysts aren't expecting anything special.

IMAGE DISTRIBUTED FOR XBOX - Lizzie Caldwell of Seattle plays Halo 4 before the game's launch, on Monday, Nov. 5, 2012 in Seattle. (Photo by Stephen Brasher/Invision for Xbox/AP Images)
Invision for Xbox/AP Images
So what's driving the stocks higher despite so-so performance? It's the expectation for a new round in the console war, with new Xbox and PlayStation models rolling out in time for the holidays. Microsoft (MSFT) is expected to unveil the new Xbox on May 21st.

And we already know Sony's (SNE) PlayStation 4 will have touch-sensing controllers and a 'share' button to allow gamers to live-cast their play to friends. Sony is likely to release more details at next month's E3 videogame conference.

In the meantime, though, console sales have slumped as gamers await the new models, or anticipate that current models will be deeply discounted.

As for the game makers, they've had some high profile releases this year. EA has "Crysis 3" and "Dead Space 3". Analysts will be watching sales of those games when the company reports.

EA has also been dealing with the surprise resignation in mid-March of its CEO. The company has not yet named a replacement. And the company warned that its earnings for the first-quarter were likely to fall short of Wall Street expectations.

A fourth video game maker, THQ, filed for bankruptcy in December, and it's in the process of selling of its business in parts.

The tepid offering of new games has weighed on Game Stop. The retailer is also dealing with a customer base that has been migrating to cheaper mobile and social games. EA forecasts that digitally delivered video games may account for half of its sales by 2015.

-Produced by Drew Trachtenberg

An Iron Throne for Your Golden Years: Our 'Game of Thrones' Stock Picks
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Midday Report: Shares of Video Game Makers Soar Amid Sluggish Sales
Stock: Goldman Sachs (GS)
As the Master of Coin on the Small Council in King's Landing, Petyr is in control of the kingdom's finances. And while the ruling Lannister family has a wealth of gold, the kingdom's expenses are many. So it's no surprise that Petyr would prefer investing in a large investment banking and securities company such as Goldman Sachs. Not only does Goldman Sachs profit from various financial services, but the company seems to always be profitable regardless of what happens in the stock market, housing market, or broader economy.
Stock: Zynga (ZNGA)
Even a child ruling a kingdom needs to blow off steam once in a while. That makes Zynga, a company focused on building social and casual games, the perfect pick for Joffrey Baratheon. Zynga also watched many of its executives leave the company and its stock price plummet, similar to the situation that Joffrey faces in King's Landing as the kingdom unravels. Yet Zynga's stock structure provides its CEO, Mark Pincus, 70 votes per share. That means that as of the end of 2012, Zynga's CEO owned 59 percent of the total voting power. Take that, mere commoner! It's not bad to be the head of Zynga... unless your stock's awful performance costs you a spot on the Forbes billionaire list.
Stock: Yahoo! (YHOO)
The Queen Regent and mother of Joffrey Baratheon, Cersei Lannister would admire a bold female CEO such as Marissa Mayer of Yahoo! Joining Yahoo! less than a year ago, Mayer is determined to turn around the struggling company, and is focused on building Yahoo!'s employees and changing the internal culture. Bold leadership is something that Cersei would identify with, although the two have quite different perspectives on how to get results.
Stock: LinkedIn (LNKD)
Tyrion Lannister is often underestimated by those around him given his size and appearance. But time and again his intellect is what wins the day. Tyrion understands the value of building an intelligence network throughout King's Landing, which is why he would invest in LinkedIn. In the social media realm, LinkedIn is also oftentimes overlooked due to Facebook's much larger user base -- over 1 billion monthly active users, compared to its own roughly 200 million total registered users (not monthly active users). Although Facebook towers over LinkedIn, LinkedIn's revenue per user was 20 times that of Facebook as of this summer.
Stock: Apple (AAPL)
Having lost his father, Eddard Stark, Robb is trying to lead his father's men to the best of his ability. While he lacks experience on the battlefield, his father taught him many lessons in leadership and duty. That's why Apple would catch Robb's interest as an investor. When Tim Cook became CEO of Apple, outsiders wondered whether he was capable of leading the giant tech company. While the company has had its challenges since then (e.g., Apple Maps), its position as one of the most influential tech companies has not been usurped by any of its rivals.
Stock: Caterpillar (CAT)
As a steward of the Night's Watch, Jon Snow must protect the Wall. He knows that winter is coming -- and the Wall might need some fortification. That would make Caterpillar, which focuses on construction and building infrastructure, top on his investing list. Since some of Caterpillar's products are used for snow removal, Jon Snow would also be demonstrating a Peter Lynch mentality of buying what you know.
Stock: Garmin (GRMN)
Living in exile hasn't been easy for Daenerys, as she's never found a true place to call her own. But as she establishes her identity as the Mother of Dragons, she's determined to return to Westeros. As someone seeking direction and a way home, Daenerys would likely buy shares of Garmin for her investing portfolio. The GPS technology company creates navigation products for every mode of transportation, including air and sea. And if she's ever to return to Westeros, one of Garmin's marine products would sure be useful.
Stock: Berkshire Hathaway (BRK-A; BRK-B)
As a eunuch, Varys demonstrates his power through a (spider)web of contacts that feed him information. He uses information to gain a personal advantage, creating an insurance policy of sorts. Therefore Varys would be a fan of the insurance model and invest in Berkshire Hathaway. Berkshire Hathaway is a large conglomerate holding company, owning stakes in or even whole companies across many different industries. Similarly, beyond his network of information-sharing contacts, Varys seems to have a hand in structuring deals or alliances across the kingdom.
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