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Game On For Video Game Stocks

NEW YORK ( TheStreet -- It will soon be game on for the game companies.

Activision (ATVI - Get Report) and Electronic Arts (EA - Get Report) have both seen the stock prices rise recently, but every summer these stocks pull back. That's when investors, who haven't gotten into the game, should consider getting into these stocks. Especially this year because the holiday season is shaping up to be a huge one.

First, the pull back. Each summer over the past five years, these stocks experience a period of selling during June. June is typically a bad month for tech stocks. Even in positive years the SPDR XLK sees some selling in mid-June. Activision stock has run up 42% year-to-date chasing away lots of fresh cash. However, the company recently reported its earnings and analysts were spooked by the drop in Warcraft subscribers and so it sold off 6%. The company was also cautious about the upcoming console cycle and gave general market warnings. This has primed the pump for some selling in early June.

Electronic Arts has stumbled along for most of the year until moving higher after recently reporting its earnings. Unlike Activision's disappointment, EA beat estimates and guided higher causing the stock to pop. The company reached those numbers by cutting costs after a year that saw the company's CEO leave. EA also seems to be cautious about the new consoles. The stock has not recovered from its 2011 highs of mid $20's, but it is up 27.5% over the past month. So both the stocks have moved, but that doesn't mean new money can't still get in. The key on both of these names is to wait for the June selling period.

While both have been cautious about the new consoles, the excitement and anticipation for the consoles is building. This is the second piece to this investment decision. Microsoft's (MSFT - Get Report) Xbox is long overdue for an upgrade. The new version is rumored to be called the 720 or the Infinity and is going to be revealed on May 21 in Washington. Typically, these consoles will have a pre-order period and start selling in time for the holidays, usually hitting the market in October or November. It is expected to be faster and have better graphics and there is a rumor that Skype will be incorporated. This would make sense since much of Xbox Live already has an audio capability; why not add an on-camera feature? Xbox is already the top selling console in the U.S. every month even though users know a new unit is coming out later this year. Microsoft still shipped 8.9 million units during the first 9 months of fiscal 2013 and revenue increased 55% last quarter for Xbox to $641 million.
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ATVI $33.90 -1.37%
BBY $32.66 -2.40%
EA $62.32 -1.63%
GME $32.90 -1.40%
MSFT $49.90 -2.04%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

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