What You Missed This Week in Video Games

“Game On” is The Fly’s weekly recap of the stories powering up or beating down video game stocks.

NEW RELEASES: Among this week’s big releases is Electronic Arts’ (EA) football sim “Madden NFL 24,” which launches on August 18 for PlayStation 4 (SONY), PS5, PC, Xbox One (MSFT), and Xbox Series X/S. Also out this week is the Nintendo Switch (NTDOY) and PS4 port of Take-Two’s (TTWO) “Red Dead Redemption,” which releases August 17.

TAKE-TWO RESULTS: Last week, Take-Two reported results for the first quarter, with both GAAP earnings per share and net bookings falling below Wall Street estimates. The company, however, reiterated its net bookings outlook for fiscal 2024. “We had a strong start to the fiscal year and achieved Net Bookings of $1.2B, which was at the high end of our expectations. Our performance was led by our catalog of iconic, industry-leading intellectual properties, which continues to resonate with our player communities worldwide,” said Strauss Zelnick, Chairman and CEO of Take-Two. “Our core business trends remain healthy, and we are reiterating our prior guidance of $5.45 to $5.55 billion in Net Bookings for Fiscal 2024. Our teams are making excellent progress on our strategic focus areas, including the advancement of our eagerly-anticipated development pipeline and capitalizing on our revenue-driven opportunities and synergies, all while maintaining a deep focus on efficiency. We remain confident that we are positioning our business for a significant inflection point in fiscal 2025, which we believe will include new record levels of operating performance. We would like to thank all of our stakeholders for their continued support, and we look forward to delivering on this exciting next chapter.”

Following the report, Credit Suisse raised the firm’s price target on Take-Two to $147 from $128 and maintained a Neutral rating on the shares following. The firm noted that Take-Two reported revenue and adjusted EPS that fell short of consensus due to underperformance from new releases, offset by a positive mix shift to online – RCS was in-line with Credit Suisse’s estimates and increased 38% year-over-year driven by robust engagement with franchise titles and accounted for 84% of net bookings in the quarter. That said, mobile also decelerated from flat to slightly down year-over-year but Zynga’s ad business proved a point of strength and accelerated 11% year-over-year as it benefited from Popcore and increased ad load to match what the firm believes was an ongoing recovery of the general advertising market.

ROBLOX RESULTS: Last Wednesday, Roblox (RBLX) reported lower-than-expected Q2 earnings and revenue, though it also reported a 25% year-over-year increase in average daily active users and a 19% year-over-year hike in average monthly unique payers. “We continue to drive high rates of organic growth in DAUs, Hours, and Bookings. We are growing among users of all ages and across all geographies. We remain focused on extending our product leadership to drive value for creators and brands, and even more innovative and immersive avatars and experiences for our users,” said David Baszucki, founder and CEO of Roblox.

“This is our second consecutive quarter with year-over-year bookings growth in the low-20s. During the quarter, we also built the plans that we believe will enable us to generate operating leverage against infrastructure and trust & safety spend starting next quarter and against compensation expense starting in the first quarter of 2024,” said Michael Guthrie, chief financial officer of Roblox.

Following the report, Wedbush upgraded Roblox to Outperform from Neutral with a $37 price target. While “underwhelming” Q2 results brought light to “some soft spots within the company,” the firm believes that “the data trackers, seasonality, and stubbornness contributed to the misses” and argues that Roblox “may have the most compelling growth trajectory among the video game names in our coverage universe” when taking into account the size of its user base, its new products, and the potential to revisit its approach to profits. After a selloff on Wednesday, the firm expects “patient investors to be rewarded” by continued topline growth, new product introductions, and “a more aggressive approach to cost control in future periods,” the analyst told investors.

Click here to check out recent Media Buzz Sentiment on Roblox as measured by TipRanks.

APP STORE: Last week, the U.S. Supreme Court decided to allow Apple (AAPL) to keep its App Store payment rules in place for the time being, dismissing a request from “Fortnite” maker Epic Games that would have let developers begin directing iPhone users to alternative payment systems, Bloomberg’s Greg Stohr (TCEHY), KKR (KKR), Disney (DIS), and Sony.

OTHER STORIES TO WATCH:

• Microsoft president Brad Smith said the company’s proposed takeover of Activision Blizzard (ATVI) was cleared in New Zealand (read more)
• Third Point and Greenlight Capital reported new stakes in Activision Blizzard in SEC filings (read more)
• Bethesda announced and released a remaster of “Quake II” on Thursday (read more)
• Saudi-funded Savvy Games was the mystery partner in a failed $2B Embracer (THQQF) deal, Axios reports (read more)
• Ubisoft (UBSFY) said that “Assassin’s Creed Mirage” will release a week earlier than previously planned (read more)