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Nov. 22, 2021, 4:49 p.m. EST

Activision, ‘Battlefield 2042’ woes slam videogame stocks

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By Wallace Witkowski

Videogame stocks were hammered Monday as Activision Blizzard Inc.’s management and Electronic Arts Inc.’s new game faced criticism.

After more than a week of calls for Activision /zigman2/quotes/200717283/composite ATVI +25.88% Chief Executive Bobby Kotick to step down, MKM Partners analyst Eric Handler joined the parade Monday morning. The analyst downgraded Activision shares to a sell rating from neutral in a note entitled “Big Changes Are Needed At The House Bobby Built,” referring to Kotick.

Handler wrote that it appears that reports of sexual misconduct and discrimination at the videogame publisher “are deeper than originally feared.”

“Furthermore, we do not believe these problems are going to go away until a clear resolution is reached, starting with the removal of CEO Bobby Kotick,” Handler said. “From what we have read from press reports and social media, employee morale is extremely low, which is likely to impact not only game development timelines but also quality. Business partnerships are also at risk.”

Last week, the Journal reported that Kotick had known about sexual harassment and misconduct at the videogame publisher for years, prompting a second employee walkout and driving the stock to its worst close in more than a year . While shares only closed down 0.3% Monday, they’re down more than 20% for November alone.

Sunday evening, The Wall Street Journal reported that Kotick has told senior managers he would consider stepping down if culture problems that allowed years of sexual harassment and discrimination could not be fixed “with speed.”

The problems at Electronic Arts /zigman2/quotes/206954087/composite EA +2.66% were about a different industry issue: Game development timelines and quality. EA released “Battlefield 2042” on Friday, and the game quickly became regarded as one of the worst reviewed games in the history of online games site Steam . EA shares finished down 4.6% Monday.

At last check, only 27% of the 37,984 reviews for the game were positive, with most of the negative reviews complaining that the game was unfinished, contained bugs, and lacked many features that fans wanted. “Battlefield 2042” was originally expected out in October, then was feared to be delayed out into 2022 , then was slated for a November release.

Still, the game ranked as the third bestselling game on the site. That was noticed by Jefferies analyst Andrew Uerkwitz, who has a buy on EA.

“We are watching Steam user reviews and noticing how they are more a place to complain as opposed to review games,” Uerkwitz said. “‘Battlefield 2042’ has ranked near the bottom based on reviews, yet currently sits at the top on the bestseller list.”

Publishers have been stuck between a rock and a hard place when it comes to releasing major games ever since CD Projekt SA’s /zigman2/quotes/206478470/delayed PL:CDR +1.57% long-awaited and long-overdue release last year of “Cyberpunk 2077” forced distributors like Sony Group Corp.  /zigman2/quotes/208567357/composite SONY -7.17%  to offer full refunds due to low quality.

Activision Blizzard also said earlier in the month it would be delaying the release of two of its highly anticipated games , and Take-Two Interactive Software Inc. /zigman2/quotes/204008930/composite TTWO +0.96% suffered after last week’s rough launch of its “Grand Theft Auto: The Trilogy – Definitive Edition.” Take-Two shares closed down 3.3% Monday.

Read: Amazon videogame exec on the success of ‘New World’ and why everyone is chasing Roblox

Jefferies’ Uerkwitz, however, seemed more interested in Roblox Corp. /zigman2/quotes/223883423/composite RBLX -2.33% in his Monday note owing to the social gaming company’s newly released “Nikeland,” where a player can customize a playground and get free Nike Inc. /zigman2/quotes/203439053/composite NKE -0.83% accessories for their avatar by going into an in-app showroom.

“From a brand perspective, Roblox made it clear that the partnerships won’t stop any time soon,” Uerkwitz said. “In fact, it would appear that the company is changing the way that brands look at marketing spend. By creating a branded experience, you’re giving the user the option to participate in an advertisement; eyeballs to the ad vs ad to the eyeballs.”

While Roblox shares led the sector down with a 10.8% drop, shares are also still up 43% for November alone. The only other stock in the videogame sector performing near as well this month is Unity Software Inc. /zigman2/quotes/221035391/composite U -4.48% , which has notched a gain of 17% while finishing down 6.6% Monday.

In comparison, the S&P 500 index  /zigman2/quotes/210599714/realtime SPX -1.84% is up 1.7% for November, while the iShares Expanded Tech-Software Sector ETF  /zigman2/quotes/201870252/composite IGV -1.84% is down 2.8%.

/zigman2/quotes/200717283/composite
US : U.S.: Nasdaq
$ 82.31
+16.92 +25.88%
Volume: 120.27M
Jan. 18, 2022 4:00p
P/E Ratio
24.38
Dividend Yield
0.57%
Market Cap
$50.93 billion
Rev. per Employee
$954,105
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/zigman2/quotes/206954087/composite
US : U.S.: Nasdaq
$ 133.91
+3.47 +2.66%
Volume: 8.76M
Jan. 18, 2022 4:00p
P/E Ratio
49.32
Dividend Yield
0.51%
Market Cap
$36.89 billion
Rev. per Employee
$588,636
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/zigman2/quotes/206478470/delayed
PL : Poland: Warsaw
194.00
+3.00 +1.57%
Volume: 1.47M
Jan. 18, 2022 5:51p
P/E Ratio
17.63
Dividend Yield
2.58%
Market Cap
zł19.24 billion
Rev. per Employee
N/A
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/zigman2/quotes/208567357/composite
US : U.S.: NYSE
$ 115.84
-8.95 -7.17%
Volume: 3.05M
Jan. 18, 2022 4:00p
P/E Ratio
17.18
Dividend Yield
0.35%
Market Cap
$154.67 billion
Rev. per Employee
$810,282
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/zigman2/quotes/204008930/composite
US : U.S.: Nasdaq
$ 154.04
+1.46 +0.96%
Volume: 5.85M
Jan. 18, 2022 4:00p
P/E Ratio
31.83
Dividend Yield
N/A
Market Cap
$17.61 billion
Rev. per Employee
$519,148
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/zigman2/quotes/223883423/composite
US : U.S.: NYSE
$ 77.21
-1.84 -2.33%
Volume: 23.99M
Jan. 18, 2022 4:03p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$45.76 billion
Rev. per Employee
N/A
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/zigman2/quotes/203439053/composite
US : U.S.: NYSE
$ 146.95
-1.23 -0.83%
Volume: 6.93M
Jan. 18, 2022 4:00p
P/E Ratio
38.53
Dividend Yield
0.83%
Market Cap
$234.32 billion
Rev. per Employee
$632,224
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/zigman2/quotes/221035391/composite
US : U.S.: NYSE
$ 112.64
-5.28 -4.48%
Volume: 5.65M
Jan. 18, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$33.73 billion
Rev. per Employee
$253,686
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,577.11
-85.74 -1.84%
Volume: 2.74B
Jan. 18, 2022 4:56p
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/zigman2/quotes/201870252/composite
US : U.S.: Cboe BZX
$ 350.47
-6.57 -1.84%
Volume: 1.71M
Jan. 18, 2022 4:00p
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