4 Game Stocks to Watch After E3

by Anthony John Agnello | June 10, 2011 12:51 pm

There are two views investors can have on this year’s Electronic Entertainment Expo, which concluded Thursday: On one hand, no single game or playing device was unveiled that can significantly turn around the industry. The best-case-scenario is for sales to be flat by the end of 2011.

The more optimistic take on E3 is that some of the industry’s more reliable companies debuted products that should help them grow in the second half of the year. Strong franchises and lower development costs will translate to stronger earnings — and stronger stocks.

These are the four stocks to watch coming out of E3:

Microsoft (NASDAQ:MSFT[1])

While the stock is as notoriously “dead money,” Microsoft’s entertainment division will follow up its break out 2010 based on its E3 showing. What its products lacked in creativity was made up for in business savvy. The company’s Kinect hands-free motion-controlled camera device was the focus. The company announced new family-oriented fare like Disney’s (NYSE:DIS[2]) Disneyland Adventures, an interactive version of the theme park, follow-ups to last year’s million sellers Dance Central 2 and Kinect Sports Season 2, and a new game based on the Star Wars series. Microsoft also promised two new entries in the Halo franchise, the perennial best-selling shooting game series. These games should help Microsoft’s entertainment division have another holiday season that continues to argue for separating the division from the larger company.

Electronic Arts (NASDAQ:ERTS[3])

EA has been performing well in 2011, but there’s been some worry about the second half of the year. With a professional football lockout still looming, the popular Madden NFL video games would lose its best marketing source, and ongoing development costs of the Star Wars: The Old Republic online role-playing game would continue to take its toll. The company’s E3 showing should quell some of those fears, with Star Wars especially looking as though it will be released sooner rather than later. Most promising of all was the debut of military game Battlefield 3, which looks like EA’s best chance to cut into the Call of Duty market when it releases in October.

Activision Blizzard (NASDAQ:ATVI[4])

The company behind Call of Duty, meanwhile, also had a promising show at E3. The new game in the series, Modern Warfare 3, garnered favorable press reactions. Activision’s new social network based around the series named Call of Duty Elite, which includes a paid premium subscription service that gives players access to new downloadable game content early, inspired some skepticism, however. More promising to investors is that ATVI appears to be greatly reducing its development costs, with long-standing, poor-selling game franchises like the Tony Hawk and Guitar Hero series absent from the show. With costs down, ATVI may just start growing as a stock again[5].

Sony (NYSE:SNE[6])

Sony’s presence at E3 was as much about damage control as it was laying out a business strategy for the future. The company apologized again for the recent hacking of its Playstation Network, when hackers gained access to 77 million user profiles and their credit card information on the company’s online gaming network in April. Sony also debuted the Playstation Vita, a new portable gaming device that is its answer for competing with Apple’s (NASDAQ:AAPL[7]) iPad and iPhone. The new device features high-definition games similar to those on the Playstation 3 home game machine, but with an even greater emphasis on smaller casual mobile and social titles. Many of these smaller games will be available through the company’s new Playstation Suite app store, a digital storefront that will be available on Google (NASDAQ:GOOG[8]) Android devices in the future.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello[9] and become a fan of InvestorPlace on Facebook.[10]

  1. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  2. DIS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DIS
  3. ERTS: http://studio-5.financialcontent.com/investplace/quote?Symbol=ERTS
  4. ATVI: http://studio-5.financialcontent.com/investplace/quote?Symbol=ATVI
  5. ATVI may just start growing as a stock again: https://investorplace.com/44606/its-game-on-for-activision-shares/
  6. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  7. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  8. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  9. @ajohnagnello: http://twitter.com/#%21/ajohnagnello
  10. InvestorPlace on Facebook.: http://www.facebook.com/pages/InvestorPlace/178906405484848

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