Analysts: September NPD Weakness To 'Reverse' In October

Despite a down month for the games industry in September's NPD results, analysts are unconcerned, noting the results actually beat expectations -- and they expect much better days ahead, with growth in October paving the way for a holiday surge.
Analysts say game industry growth is still strong in the face of an overall 7 percent decline for the industry, and that September NPD results were largely as they expected in the face of a challenging comparison to Halo 3's release month last year. The number of consoles sold in fact grew, and the decline in sales can be attributed to a concurrent decline in hardware prices, the NPD's Anita Frazier said yesterday. So while the industry has indeed seen its first "true" decline in more than two years, analysts are still confident in an upswing ahead for the holiday season. "While overall sales growth was negative, implying that the consumer is beginning to feel the effects of the economic downturn, it was above most expectations, with solid hardware sales implying continued software sales strength through the holidays," says Wedbush Morgan's Michael Pachter. "We expect October software sales to be solidly higher than last year’s, and believe that any perceptions of consumer weakness caused by the September data will be reversed next month." Lazard Capital Markets' Colin Sebastian agrees that industry sales will pick up again in October, thanks to more Wii supplies, Xbox 360 price cuts and a strong lineup of releases for the month. The analyst pegs EA, Activision and Ubisoft as the likely leaders, expecting EA's Rock Band 2 and Left 4 Dead; Activision Blizzard's Wrath of the Lich King and Guitar Hero; and Ubi's Prince of Persia and Far Cry 2 to be among the month's winners. Cowen Group analyst Doug Creutz says that as far as his firm's concerned, September NPD actually exceeded bleak expectations, and the results should "allay investor concerns." "We think video games are a relatively recession-resistant category due to their high entertainment value/price proposition and we continue to recommend [Activision and Take-Two stock]." All three analysts agree that industry sales will accelerate again beginning in October, and that growth is expected to surge into the holidays.

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