Game On For Video Game Stocks

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

Activision ( ATVI) and Electronic Arts ( EA) 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) 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.

Sony ( SNE) revealed in September that it had updated the Playstation console to be named PS4. It is expected to launch in the fall as well. This next generation console is expected to rival PC gaming. It is also expected to incorporate a mobile feature in order to continue game play. A share function will allow game clips to be replayed and/or uploaded to other websites. Sony's PS3 is the top selling console globally according to VGChartz. But the PS3 was launched in 2006 and the only updates since then have been on the mobility side, particularly the PSP. Play Station fans have waited a long time for an upgrade.

The third part to this investing thesis are the game titles. Although much was made of the loss of Warcraft subscribers, Activision's next big title is Call of Duty Ghosts and they will be showing footage of it at Microsoft's May 21 event and then releasing it on Nov. 5. A teaser has been added to Activision's Facebook ( FB) page and the game can be pre-ordered now through Amazon ( AMZN)or Gamestop ( GME) or even Toys R Us. Gamers can unlock a special Ghosts Gun Camo for Black Ops 2 if they pre-order before July 1. Call of Duty is the most successful franchise in gaming history. The last installment made over $1 billion within 15 days, and since the release of the first title in 2003, the series has sold over 100 million copies. Ghosts will be available on both the new Xbox and PS4, but sorry Nintendo - they are skipping Wii U. Pre-order at Best Buy ( BBY)and you receive a $15 gift card.

Electronic Arts will be hitting the holidays with Battlefield 4. Call of Duty will probably outsell Battlefield 4, but it will be tough competition. Pre-orders are being taken now for Battlefield 4 and the title will be released Oct. 31. It is already number four in the USA pre-order chart for the Xbox version at VG Chartz(COD Ghosts has not been tracked yet.) While Activision will be at Microsoft's event on the 21st, EA will be making a presentation at the Stifel technology conference in NY. If you have a longer horizon, EA has acquired the Star Wars license and has opened a Los Angeles office for its DICE studio to begin working on the franchise. According to Game Informer, people "stood up and cheered". But do not expect any titles during fiscal year 2014, which ends on March 31, 2014.

New consoles, new game titles and summer selloff are all colliding to unlock a buying opportunity for video game investors.

--Written by Debra Borchardt in New York.

>To contact the writer of this article, click here: Debra Borchardt.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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