Are GameStop Sales A Good Indicator For Video Game Publisher Stocks?

Electronic Arts Inc. EA is set to kick off Q4 earnings season for gaming stocks on Thursday when it reports after the closing bell. Video game retail leader GameStop Corp. GME is not expected to report earnings until the end of March, but GameStop investors will likely be watching EA earnings closely.

A Look Back For Correlation

Benzinga took a look back to see if GameStop quarterly sales indicate a positive quarter ahead for gaming stocks or vice versa. Here’s a summary of the results. The numbers below include data from EA, Activision Blizzard, Inc. ATVI and Take-Two Interactive Software, Inc. TTWO.

In the past eight quarters, GameStop has reported three revenue beats and five revenue misses. In the three months following revenue beats, the three gaming stocks mentioned above averaged a 10.9 percent gain. In the three months following the three GameStop misses, the three stocks averaged only 6.0 percent gains.

The difference is even more pronounced when looking at the reverse relationship. In the three months leading up to GameStop revenue beats, EA, Activision and Take-Two averaged an 11.7 percent gain. In the three months ahead of GameStop revenue misses, the stock averaged only a 5.7 percent gain.

Of course, two years is not a very large sample size, and correlation does not confirm causation. However, the data above seems to suggest the intuitive idea that the fates of all four stocks are certainly intertwined.