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(Sales Age) Earnings time again (Nintendo, Microsoft, Sony, UBI)
- Thread starter sonycowboy
- Start date
tehrik-e-insaaf
Member
Hey guys I don't know how many of you are in the hedge fund/investment management industry - but I run a pretty large portfolio for some clients and just thought I'd share my thinking around how I size up earnings/financial results. Obviously I don't want to get too technical with the earnings since there are thousands of ways to interpret it, so let me just be brief and speak on specific operational issues. I'd love to get some feedback from anyone here who actually knows what they are talking about (fanboys please don't comment if you don't know what a balance sheet is or what liquidity means).
I just opened a massive short position on ATVI and a massive long position on ERTS
ATVI balance sheet = crap - they have 9 billion in assets labeled as Goodwill based on the reverse merger with Blizzard, unfortunately the forward P/E on the merger valuation Goodwill is based on valuations from pre-September levels at the peak of media tech cycle. ATVI was essentially cashless prior to injection by Vivendi, they are burning through cash at a ridiculous rate even despite beating revenue projections by 40% - most of their spending is towards rehashing existing product lines, majority of their R&D spend is not for new products meaning they will be caught in a CAPEX trap in another year and may need to raise cash/debt
Further, despite Modern Warfare 2 overhype and likely positive reception for Starcraft 2 in Q4/Q1 2010, current forward earnings place too much weight on Guitar Hero. Analysts attributing per-SKU revenue for GH at 2007 and 2008 levels, but how many people are going to repurchase instruments and other crap all over again? Even if you account for DLC which is expanding, earnings will need to go above and beyond to achieve justified valuations relative to other competitors.
Goldman calls it a "conviction buy" based on "solid technical momentum" - every stock they label a conviction buy has historically tanked in 3-6 months.
Proof is in the pudding - ATVI beat revenues by 40% to Street estimates, and the stock struggled to break technical resistance points because of balance sheet game ATVI is playing.
ERTS on the other hand shows similar cashflow levels, they sufficiently burned through most of their new product R&D spending (unlikely to be caught next year and can rehash product cycle again) and have written down significant amounts of goodwill to account for post-crash market (Pandemonium was completely written off and spun off to reduce costs). Further, they have Star Wars MMO coming up which may not be popular globally, but will create stable revenue streams for the company and allow it to establish a foothold in the online MMORPG space that it was previously missing. ERTS also has the most expansive and efficient distribution network and will be publishing id's Rage, and has a deal in-place with Valve now for product distribution.
Other positions I have -
SHORT NINTENDO (7974.OSA) (upward pressure on Yen currency will screw up actual delivered earnings for Q2/Q3/Q4, risk probability of weak winter product lineup to effect sell-through of console in Japan, revival of PS3/PSP in Japanese market to affect margins especially if response is price drop)
LONG TAKE-TWO (TTWO) (solid product portfolio lineup, high-margin earnings from future DLC for GTA4 userbase, little to no debt meaning, excellent cash position, resolved accounting problems, at <$1B valuation to be target of speculative take over rumors meaning sell when reaches 30% upside target to current prices)
UBI is the only other player I am really interested in, but it's difficult to forecast how their games will perform given critical reception has been crap for their past few products but they sold decently well. However most retailers have been negative on their upcoming products given so much AC1 product had to be sold at massive discounts and UBI didn't rebate anything to them. On the other hand there are rumors that UBI may be the target of a hostile takeover by someone like Disney which could destroy any short position. I am staying away for now.
I just opened a massive short position on ATVI and a massive long position on ERTS
ATVI balance sheet = crap - they have 9 billion in assets labeled as Goodwill based on the reverse merger with Blizzard, unfortunately the forward P/E on the merger valuation Goodwill is based on valuations from pre-September levels at the peak of media tech cycle. ATVI was essentially cashless prior to injection by Vivendi, they are burning through cash at a ridiculous rate even despite beating revenue projections by 40% - most of their spending is towards rehashing existing product lines, majority of their R&D spend is not for new products meaning they will be caught in a CAPEX trap in another year and may need to raise cash/debt
Further, despite Modern Warfare 2 overhype and likely positive reception for Starcraft 2 in Q4/Q1 2010, current forward earnings place too much weight on Guitar Hero. Analysts attributing per-SKU revenue for GH at 2007 and 2008 levels, but how many people are going to repurchase instruments and other crap all over again? Even if you account for DLC which is expanding, earnings will need to go above and beyond to achieve justified valuations relative to other competitors.
Goldman calls it a "conviction buy" based on "solid technical momentum" - every stock they label a conviction buy has historically tanked in 3-6 months.
Proof is in the pudding - ATVI beat revenues by 40% to Street estimates, and the stock struggled to break technical resistance points because of balance sheet game ATVI is playing.
ERTS on the other hand shows similar cashflow levels, they sufficiently burned through most of their new product R&D spending (unlikely to be caught next year and can rehash product cycle again) and have written down significant amounts of goodwill to account for post-crash market (Pandemonium was completely written off and spun off to reduce costs). Further, they have Star Wars MMO coming up which may not be popular globally, but will create stable revenue streams for the company and allow it to establish a foothold in the online MMORPG space that it was previously missing. ERTS also has the most expansive and efficient distribution network and will be publishing id's Rage, and has a deal in-place with Valve now for product distribution.
Other positions I have -
SHORT NINTENDO (7974.OSA) (upward pressure on Yen currency will screw up actual delivered earnings for Q2/Q3/Q4, risk probability of weak winter product lineup to effect sell-through of console in Japan, revival of PS3/PSP in Japanese market to affect margins especially if response is price drop)
LONG TAKE-TWO (TTWO) (solid product portfolio lineup, high-margin earnings from future DLC for GTA4 userbase, little to no debt meaning, excellent cash position, resolved accounting problems, at <$1B valuation to be target of speculative take over rumors meaning sell when reaches 30% upside target to current prices)
UBI is the only other player I am really interested in, but it's difficult to forecast how their games will perform given critical reception has been crap for their past few products but they sold decently well. However most retailers have been negative on their upcoming products given so much AC1 product had to be sold at massive discounts and UBI didn't rebate anything to them. On the other hand there are rumors that UBI may be the target of a hostile takeover by someone like Disney which could destroy any short position. I am staying away for now.
nextgeneration
Member
tehrik-e-insaaf,
You might get a better response if you post in this thread:
http://www.neogaf.com/forum/showthread.php?t=176332
You might get a better response if you post in this thread:
http://www.neogaf.com/forum/showthread.php?t=176332
Captain Smoker
Member
Comparison.
Everything is Net Income.
Results for the 12 Months Ended March 2009.
Total Revenue with Nintendo: $ 2,325,986,866
Total Revenue without Nintendo: $ - 450,361,178
Everything is Net Income.
Results for the 12 Months Ended March 2009.
Code:
[B]Company Original Revenue Average Ex. Rate Revenue in US $[/B]
Nintendo ¥ 279,089,000,000 100.52378 $ 2,776,348,044
Bandai Namco ¥ 11,830,000,000 100.52378 $ 117,683,597
Capcom ¥ 8,063,000,000 100.52378 $ 80,209,877
Hudson ¥ 1,742,000,000 100.52378 $ 17,329,233
Takara Tomy ¥ 1,377,000,000 100.52378 $ 13,698,251
Eizo Nanao ¥ 682,000,000 100.52378 $ 6,784,464
Koei ¥ 25,000,000 100.52378 $ 248,697
AQ Interactive ¥ - 468,000,000 100.52378 $ - 4,655,615
D3 ¥ - 2,304,000,000 100.52378 $ - 22,919,950
Sega Sammy ¥ - 22,882,000,000 100.52378 $ - 227,627,732
THQ $ - 431,112,000 1 $ - 431,112,000Total Revenue without Nintendo: $ - 450,361,178
tehrik-e-insaaf said:
You are a professional, and I just trade as a hobby. But for what it is worth I agree with almost all of your analysis, especially about TTWO. The strong balance sheet, stable of successful IPs, and the cloud that hangs over the company stemming from corporate governance issues in the past make this stock undervalued imo. Moreover, I think the potential for a takeover is very likely, not necessarily in the short run, but in the long run. Especially since I bet the board is suitably chastised from turning down ERTS offer and their stock losing 75% of its value after that. I have a large long position in TTWO. (It is also one of my favorite stocks cause I made an absolute killing on them after the first ERTS bid. Emotionally attached you could say.)
For ATVI, I just exited a position in ATVI for a nice gain. I exited for 2 reasons. 1) For stocks like ATVI which are hedge fund darlings, sometimes I feel the type of balance sheet analysis you are doing isn't as valid. (In fact I think since stock price correlations with the broader market or a sector are close to 1, fundamentals really aren't driving any stock in the current market. They will eventually but right now everything is trading on macroeconomics.) I exited ATVI because it is a hedge fund darling so I thought the upside is limited as hedge funds are going to see redemptions continue, forcing them to sell their least depreciated holdings to meet this negative cash flow. I just think over the next year the hedge funds who threw up gates on their investors are going to have to eventually start letting money out, killing hedge fund darling stocks. 2) All indications show that music games have peaked and that competition is eating into music game profit margins. I look at ATVI as 25% GH, 25% CoD, and 50% Blizzard. I think they are losing one leg of that tripod with GH and expectations are too high for this company.
Very bearish on Nintendo for the reasons you mentioned.
I am unsure on ERTS. On one hand the balance sheet is good, on the other hand they have a high cash burn rate and there new IPs aren't catching fire. Too risky in my opinion.
bttb said:
If I'm reading that right, Sony lost over a billion USD. Jesus Christ. The high value of the yen is raping them badly. Well, at least the game division's losses is shrinking and hardware and, more importantly,software sales are up. They can take solace in that.
bttb said:
They forecast 13 Million PS3s shipped FY09? That is a 30% increase over last year. Am I reading that right? Seems too high.
edit:
With that high forecast I think they are planning a $100 price cut for sure.
Psychotext
Member
*** REMOVED OUTDATED RESULTS - NEWEST VERSION HERE ***
Psychotext
Member
I have this for the year:Jtyettis said:
Code:
¥bn R (Day) $bn (C) $bn (R)
2009 Q1 ¥5.418 106.00 $0.051 $0.051
2009 Q2 -¥39.465 104.00 -$0.379 -$0.379
2009 Q3 ¥0.400 91.00 $0.004 $0.004
2009 Q4 -¥24.818 98.00 -$0.253 -$0.253
2009 FY -¥58.476 98.00 -$0.597 $0.597
[B] -¥58.465 -$0.577 -$0.577[/B]Where ¥bn is the reported operating income for the division in JPY. R (Day) is the exchange rate given in the financial report. $bn (C) is the calculated dollar value using R (Day) and $bn (R) is the reported dollar value.
The FY results are slightly different to the quarterly (which are what get used for the numbers above)... but this is not particularly unusual.
Captain Smoker
Member
Activision Blizzard Net Income (Apr. 08 - March 09): $ 68,015,000
I've added all quarterly results: http://investor.activision.com/results.cfm
I've added all quarterly results: http://investor.activision.com/results.cfm
ViperVisor
Member
$5.6 billion over a year is $177 every second. Print money GIF is more or less correct.
Psychotext
Member
There's a good description here:w3stfa11 said:
http://en.wikipedia.org/wiki/Operating_income
Basically means that it's the profit before taxes etc are paid. If I was to guess, I'd say that investors are more interested in net income because it's what the company really made. But I don't use that in the numbers simply because we only get net income figures for Nintendo (Companies generally don't report / calculate net income at a division level).
lowlylowlycook
Member
w3stfa11 said:
Net income includes investment income or losses and taxes and some other stuff. These days the big difference is currency losses for Japanese companies and taxes, I guess.
Net income is more important but you only get that number for the whole company not for divisions so to do apples to apples comparison operating income is the only real choice.
Paracelsus
Member
bttb said:Bandai Namco: Presentation Materials for Q4
Game Contents: Software Forecasts
Code:Title Region Release Plan Tekken 6 (PS3/360) WW FY2009 H2 2,000,000 New Dragon Ball Z (PS3/360) JP/EU FY2009 H2 800,000 Family Trainer Series (Wii) JP/US/EU FY2009 H2 600,000 New Soul Calibur (PSP) JP/US/EU FY2009 H2 600,000 New Gundam (Wii/PS2) JP FY2009 H1 500,000 We Ski & Snow Board (Wii) US/EU FY2009 H1 400,000
Aren't both Vesperia and Gundam Senki PS3 due for a Q4 release?
Kurosaki Ichigo
Member
Guess they expect them to sell less than 400k then. A new PS360 DBZ unsurprisingly confirmed too.Paracelsus said:
Btw, 0 PS2 games from Konami next year as in WE/PES not coming to PS2 anymore? Also lawl at PSP/PC on End of Eternity.
tehrik-e-insaaf
Member
dionysus said:
ATVI is less a hedge fund darling more of an institutional buy. Most people are making money off of it as a "conviction" buy - meaning they are trading on technical movements in its floor/roof troughs. I am short on it because I think the shareholder's equity they claim is a mirage and that thesis will play out in the next two quarters when the SEC will require them to revalue goodwill on the balance sheet. So I think we are aligned regardless of our reasons (even if Hedge Fund redemptions continue, they will likely get out of positions in the middle-market and stick to larger cap players that they feel will dominate the market).
Someone else asked me my thoughts on SNE, here was my analysis if anyone cares:
I wouldn't touch SNE right now, they are still overvalued based on the supposed synergies the PS3 userbase was supposed to generate for them. Earnings wise the cashflow is going to tank each consecutive quarter for the rest of this generation, and their cost cutting isn't good enough to bring their earnings back in-line. The value of the Yen creates a variable that is going to be difficult to manage for their long-term earnings since they don't have enough currency swaps for their forward projections.
Now the only technical upside factor is the P/E ratio people give consumer electronics/consumer services. That might give you some benefit, but IMHO SNE current business isn't good enough to justify putting a dime in them.
If you are looking for a broader consumer stock to put money into, my suggestion is trying for device manufacturers like RIMM (Blackberry), Nokia, or Palm which all have higher upside potential. On the services side I'd play it safe with Blue chips right now and go with IBM.
EDIT: Dionysus, I just put in a request in my research group to see if they have any info on the major shareholders for ATVI. Last I remember reviewing it was primarily Vivendi + institutions (mostly pension funds). The ATVI stock hasn't achieved significant spikes enough to warrant hedge fund darling status, but I could be wrong. Hence, I re-read your post and I think you have a solid point, so let me see if I can put some facts behind your theory and if so, I may build a further short position on them.
EDIT: Thanks nextgeneration
Psychotext
Member
Interesting read.
BishopLamont
Banned
How the hell does Sega keep losing money? They're like the eastern Take-Two, very big publisher with high selling games yet they manage to keep losing money.Captain Smoker said:
lowlylowlycook
Member
You'd think Mario and Sonic Olympics game would have profits to cover everything.BishopLamont said:
Throwaway123456789
Member
Let's hope Sega Sammy doesn't have the same level of shittyness in the administration that Sega had when they backed out of the console race. I'd hate to see them go to shit again.
When do we get MS numbers?
When do we get MS numbers?
RumblingRosco
Member
"Average in Loss Year" for Nintendo being "N/A" says all that needs to be said about that company. It is operated excellently.
BishopLamont
Banned
Vinci said:
That can't be it. They're basically breaking even in that area.Sega Sammy said:
Stormbringer
Member
Additional data from Square-Enix ->
Sales numbers for specific titles for the whole fiscal year (4/1/2008 - : 3/31/2009), in units :
Dragon Quest V : 1.35M (JPN : 1.22M, NA : 0.06M, EU : 0.07M)
Dissidia FF : 0.93M (JPN : 0.91M, AS : 0.02M)
Crisis Core FFVII : 0.84M (JPN : 0.03M, NA : 0.26M, EU : 0.55M)
Chrono Trigger DS : 0.79M (JPN : 0.49M, NA : 0.24M, EU : 0.06M)
Last Remnant : 0.58M (JPN : 0.16M, NA : 0.22M, EU : 0.18M, AS : 0.02M)
FFCC EoT : 0.57M (JPN : 0.32M, NA : 0.14M, EU : 0.11M)
FFIV DS : 0.50M (JPN : 0.02M, NA : 0.30M, EU : 0.18M)
Infinite Undiscovery : 0.44M (JPN : 0.12M, NA : 0.20M, EU : 0.10M, AS : 0.02M)
Star Ocean 4 : 0.42M (JPN : 0.20M, NA : 0.20M, AS : 0.02M)
FF Tactics A2 : 0.36M (NA : 0.24M, EU : 0.12M)
Dragon Quest IV : 0.31M (JPN : 0.05M, NA : 0.11M, EU : 0.15M)
Valkyrie Profile DS : 0.23M (JPN : 0.16M, NA : 0.05M, EU : 0.02M)
Others (Japan) : 1.51M
Others (North America) : 1.69M
Others (Europe) : 0.54M
Source :
http://www.square-enix.com/jpn/pdf/news/20090519_02.pdf
Sales numbers for specific titles for the whole fiscal year (4/1/2008 - : 3/31/2009), in units :
Dragon Quest V : 1.35M (JPN : 1.22M, NA : 0.06M, EU : 0.07M)
Dissidia FF : 0.93M (JPN : 0.91M, AS : 0.02M)
Crisis Core FFVII : 0.84M (JPN : 0.03M, NA : 0.26M, EU : 0.55M)
Chrono Trigger DS : 0.79M (JPN : 0.49M, NA : 0.24M, EU : 0.06M)
Last Remnant : 0.58M (JPN : 0.16M, NA : 0.22M, EU : 0.18M, AS : 0.02M)
FFCC EoT : 0.57M (JPN : 0.32M, NA : 0.14M, EU : 0.11M)
FFIV DS : 0.50M (JPN : 0.02M, NA : 0.30M, EU : 0.18M)
Infinite Undiscovery : 0.44M (JPN : 0.12M, NA : 0.20M, EU : 0.10M, AS : 0.02M)
Star Ocean 4 : 0.42M (JPN : 0.20M, NA : 0.20M, AS : 0.02M)
FF Tactics A2 : 0.36M (NA : 0.24M, EU : 0.12M)
Dragon Quest IV : 0.31M (JPN : 0.05M, NA : 0.11M, EU : 0.15M)
Valkyrie Profile DS : 0.23M (JPN : 0.16M, NA : 0.05M, EU : 0.02M)
Others (Japan) : 1.51M
Others (North America) : 1.69M
Others (Europe) : 0.54M
Source :
http://www.square-enix.com/jpn/pdf/news/20090519_02.pdf
Stormbringer said:
260k shipped to NA+EU for DQ IV isn't horrible all things considered. I hope that the number for DQV reach similar numbers in upcoming months. I really want to see DQVI released stateside when it finally comes out.
For their 2008 fiscal year report (4/1/2007 - 3/31/2008), Square Enix listed Crisis Core at 800k Jpn and 450k NA. With these additional sales, the game has shipped almost 2.1 million copies. Not too bad considering PSP sales outside Japan. I expect Dissidia to reach at least 1.5M worldwide. Maybe even 1.75M.
I'm surprised that Last Remnant managed to ship as many copies as it did. Considering that the PC version wasn't released in Japan, or on Steam, until April, the game has likely passed 600k by now (still in the top 20 games on Steam with a peak of 1100+ concurrent players today). I know common wisdom dictates that the 360 jrps have been financial flops, but I wonder if 600k is enough to break even on a project that was 1) not a AAA game 2) developed using a middle-ware engine, and 3) likely had at least some of its marketing/production costs offset by Microsoft.
Based on sales of the other two 360 projects, I'd guess that Star Ocean 4 is heading for 550k-650k worldwide as well (really depends on the EU reception). If Square Enix followed up with a PS3 director's cut version, they could probably hit 900k-1M between both versions.
I wonder how much the Square Enix tax is hurting sales in North America. Final Fantasy IV is already playable on most DSes (which I'm sure did not help sales of the remake), but I expected Chrono Trigger at least to do better than 250k.
Stormbringer
Member
Marvelous Entertainment (results and forecasts from their investors meeting, broken down by platform) ->
But beforehand, a few precisions :
-1st column : number of titles/SKUs
-2nd column : share of titles (%)
-3rd column : shipments numbers
-4th column : share of shipments (%)
- the right half of the spreadsheet makes the comparison between the fiscal year in question and the previous one.
- 国内 : Japan, RSG : Rising Star Games, MEU : Marvelous USA.
FY 09 results :
Domestic forecasts for FY 10 :
Overseas forecasts for FY 10 :
But beforehand, a few precisions :
-1st column : number of titles/SKUs
-2nd column : share of titles (%)
-3rd column : shipments numbers
-4th column : share of shipments (%)
- the right half of the spreadsheet makes the comparison between the fiscal year in question and the previous one.
- 国内 : Japan, RSG : Rising Star Games, MEU : Marvelous USA.
FY 09 results :
Domestic forecasts for FY 10 :
Overseas forecasts for FY 10 :
Captain Smoker
Member
source: http://investor.ea.com/results.cfm
Overview (FY3 2009)
Code:
Company Original Profit/Loss Average Ex. Rate Profit/Loss in US $
Nintendo ¥ 279,089,000,000 100.52378 $ 2,776,348,044
Bandai Namco ¥ 11,830,000,000 100.52378 $ 117,683,597
Konami ¥ 10,874,000,000 100.52378 $ 108,173,409
Ubisoft 68,800,000 1.42447 $ 98,003,536
Take 2 $ 84,600,000 1 $ 84,600,000
Capcom ¥ 8,063,000,000 100.52378 $ 80,209,877
Activision Bliz. $ 68,015,000 1 $ 68,015,000
Square Enix ¥ 6,333,000,000 100.52378 $ 63,000,019
Hudson ¥ 1,742,000,000 100.52378 $ 17,329,233
Takara Tomy ¥ 1,377,000,000 100.52378 $ 13,698,251
Eizo Nanao ¥ 682,000,000 100.52378 $ 6,784,464
Koei ¥ 25,000,000 100.52378 $ 248,697
Nippon Ichi ¥ - 65,000,000 100.52378 $ - 646,613
AQ Interactive ¥ - 468,000,000 100.52378 $ - 4,655,615
Marvelous ¥ - 1,221,000,000 100.52378 $ - 12,146,380
D3 ¥ - 2,304,000,000 100.52378 $ - 22,919,950
Sega Sammy ¥ - 22,882,000,000 100.52378 $ - 227,627,732
THQ $ - 431,112,000 1 $ - 431,112,000
SCE ¥ - 58,500,000,000 100.52378 $ - 581,951,853
Electronic Arts $ - 1,088,000,000 1 $ - 1,088,000,000All Other: Net Income