Some investors appear to be saying, "Game over" for Midway (NYSE:MWY) shares today -- the stock has plunged about 30%. At any rate, what feels like ever-widening losses from the video game company certainly don't give much reason for investors to get back in the game, even if the stock's trading for less than I pay for my morning latte.
Midway's net loss for the second quarter widened to $34.8 million, or $0.38 per share, from a net loss of $14.3 million, or $0.16 per share, this time last year. Revenue fell 26.4% to $23.4 million. Unfortunately, quarterly results defined by widening losses aren't exactly unusual for Midway. Losses aren't, either -- I took a look back over the past five years, and Midway hasn't reported an annual profit even once.
I'm glad I aired my opinion that investors should stay out of the Midway back in March, and reiterated that sentiment in May when I took a look at it and rival THQ (NASDAQ:THQI), both of which had gotten whacked after announcing their quarterly results.
When it comes to the video game industry, I still feel far more positive on clear industry leaders like Activision Blizzard (NASDAQ:ATVID) or Electronic Arts (NASDAQ:ERTS), or, even better, a retailer that distributes the games, GameStop (NYSE:GME). (David Gardner has recommended all three of these for Motley Fool Stock Advisor, incidentally.)
And of course, even the mighty Electronic Arts, with its portfolio of well-known video game franchises, has been having a mysteriously difficult time turning some quarterly profits despite the expanding allure of video games these days. On the other hand, Activision Blizzard rocked the house with its recent results.
Creativity is key, and even if it can be hard for the more established video game publishing companies to keep the creative juices flowing, at least they have many mega-hits and, subsequently, ample resources to give their best shot at innovation.
Video games are here to stay and are widening their appeal with more and more types of people, be they aficionados of games like Solitaire, Tetris, and Bejeweled, or World of Warcraft, Halo, and Guitar Hero. However, even given this growing industry, investors should aim for the strongest players lest they -- in gamer speak -- get pwned.
