Hayley Beth Wolff of Rochdale Securities Points to Cedar Fair as the only Bright Spot in Leisure
2009-04-16 11:24:50
Our recently published Gaming and Leisure Report, featured an interview with Hayley Beth Wolff of Rochdale Securities who pointed to Cedar Fair as a bright spot in this horrible environment;Ms. Wolff: The only bright spot that I've seen in this space has been with Cedar Fair (FUN), the theme park company, which supports the staycation trend. They actually grew their business in a horrible environment, particularly since they are very Midwest-centric. So they are in an area where employment was most challenged, but 22.7 million guests visited, 3% more than the prior year.Americans still want to enjoy recreation activities they just want to do it at a lower price point and companies that realize that will capitalize in this roller coaster economy.
Adam Krejcik of Roth Capital Partners Discusses Long Term Growth for Chinese Online Gaming Industry
2009-04-15 10:22:29
In a recent interview with Adam Krejcik of Roth Capital Partners, LLC, for our Gaming & Leisure Report, we discussed the growth opportunity for the Online Gaming Industry in China.Mr. Krejcik: The industry has been growing at a pretty staggering rate. I think the five-year CAGR through 2008 was 60%. Going forward we expect the industry to grow at an annual rate of 20%-30%, which is still very impressive. The two main drivers of the industry are, one, a growing Internet population and two, an increase in consumer disposable income. The number of Internet users has been growing at a rapid pace in China and now exceeds that of the US despite a penetration rate well below ours. We see no real slowdown in Internet growth in the next five years. Number two, GDP growth is leading to a rise in the standard of living, which should translate into to greater levels of disposable discretionary income. This will eventually lead to higher price points and user spending within online games. So we think the macro trends are pretty favorable, and while you could argue that the spending levels may slow down here in the near term depending on how severe this economic downturn is, we believe the longer-term trends are very promising.Valuations are very depressed right now but the companies have a significant amount of cash on their balance sheets and no debt, so for investors trying to avoid companies that are overlevered or facing financing issues, this sector fits that profile.
Gamestop & Activision Blizzard are Top Picks in Gaming Space
2009-04-08 16:11:19
Our second focus in the latest issue of TWST is on Gaming & Leisure. Analyst Edward S. Williams of BMO Capital talked to us a little bit about this space, specifically the interactive entertainment area of it. His picks in this area are Gamestop (GME) and Activision Blizzard (NASDAQ: ATVI). Here's why:- Gamestop- "One of the reasons why we like GameStop, which is the retailer, is that they stand to benefit from the continued success of the Nintendo platform simply by selling the Nintendo product. In addition, they have a strong and vibrant used video game business that I imagine will experience some growth in the current economic environment as you get a more price-sensitive consumer. And then thirdly, they've made some strategic acquisitions, specifically at the end of last year, to move into the French market, which should dramatically increase their presence in the European market. Over time my guess is that the European market will become a material and significant contributor to the company's top and bottom lines."
- Activision Blizzard- "One of the key advantages that Activision Blizzard has is their heavy reliance on a product called World of Warcraft, which is a subscription-based game that has about 11.5 million people who play the game on a monthly basis. About 45% of those 11.5 million people are playing the game in the western markets, the North American and European markets, and they are paying somewhere around $15 or 15 euros a month to play the game. That game is a material contributor to the top and, more important, the operating income lines for Activision Blizzard. Besides World of Warcraft, they also rely heavily on the Call of Duty and Guitar Hero franchises, which have been tremendously successful of late and have helped to produce operating margins for Activision Blizzard that are in the mid-20% area, which is slightly higher than what we've seen historically from publishers in the category."
Soft Economy Puts Fast Food on Fast Track to Recovery
2009-04-02 11:29:41
Steve West of Stifel, Nicolaus & Company, Inc. recently gave us some insight into the Restaurant Sector . When asked about the recovery of the sector Mr West brought up the fast food segment;Mr. West: When you think about a recovery, fast food is already outperforming. They are doing pretty well, and as we get into the back half of 2009, assuming the consumer continues to trade down and eat out at fast food, which I think they will, you will see margins start expanding. They will start reaping the benefits of the cheaper food as well, and then the positive same-store sales should help leverage their fixed cost a little bit better as well. I think fast food will improve more before you see casual dining start to improve at all.Seems that in this economy the value meal is the key to growth in the sector and your waistline
Top Pick in Specialty Retail is Truly a Hot Topic According to Adrienne Tennant of Friedman, Billings, Ramsey & Co., Inc.
2009-03-31 11:07:00
When we recently spoke with Adrienne Tennant of Friedman,Billings, Ramsey for our Specialty Retail Report she identified one company as her top pick;Mrs. Tennant: I liked Hot Topic (HOTT) throughout the back half of last year and into this year, and it is still my top pick for 2009, despite its excessive valuation. You have to have something that kids or people, or whoever the target market is, would want to pay full price for. For Hot Topic thus far, it's been a connection, which was either one they locked into or it was by design, with this "Twilight" movie phenomenon that came out in November. It is based on a four- book series, and they have not only taken that "Twilight," target market, but they have taken other categories of products around that target customer and they have merchandised this store not only to capture the customer for "Twilight", but also to continue to have the customer come into the store for all these other things. In the recession of 2001, post that recession, we saw the teen kid going a bit darker, going for something a bit off the beaten path, and that fits in nicely with the Hot Topic theme. So I do like that one.Once again the younger demographic seems to be pushing this sector and Hot Topic is leading the way