How Watch Dogs' performance on PS4 and Xbox One is helping EA, Activision, and Take-Two

The PlayStation 4 and Xbox One are selling well. Big games are exceeding expectations. Even the Wii U has a blockbuster. With all of that, Wall Street is feeling good about the games industry.

Major publishers like Electronic Arts, Take-Two Interactive, and Activision are all trading higher today due in large part to yesterday’s positive monthly report from industry-tracking firm The NPD Group. Gamers spent $586 million on gaming software, hardware, and accessories at U.S. retail last month, which is up a whopping 52 percent from the previous year. Releases like Ubisoft’s open-world hacking game Watch Dogs and Nintendo’s mascot racer Mario Kart 8 both sold extremely well, which shows that consumers want to spend their money on new properties and well-recognized brands. GameStop, the biggest games-specific retailer in the U.S., is also seeing a boost thanks to the NPD report.

While EA, Take-Two, and Activision are all trading up, it’s interesting to note that the top four best-selling games in May didn’t come from any of those companies. Instead, we saw Watch Dogs from Ubisoft, Mario Kart 8 from Nintendo, MLB 14: The Show from Sony, and Wolfenstein: The New Order from Bethesda Softworks. Ubisoft and Nintendo were both up slightly, but they trade over the counter in the U.S. and not on the typical markets. Sony was down slightly, but that has more to do with the performance of its television and smartphone divisions than it does its gaming components, and Bethesda is a privately owned subsidiary of Zenimax Media.

So, if the top games came from other publishers, why is EA and Activision getting a lift? Well, that’s because consumers showed just how eager they are for new games on the latest hardware from Sony and Microsoft.

“Fifty percent of total May sales came from May releases,” Cowen & Company analyst Doug Creutz wrote in a note to investors. “That’s a record high for the month going back to 2001. We view the strong Watch Dogs sales — 75 percent of which came from the PlayStation 4 and Xbox One — as evidence that new hardware is helping to revitalize software demand.”

If that trend holds true — and it has since the Xbox One and PlayStation 4 debuted in November — it should help EA sell a ton of copies of its upcoming shooter Battlefield: Hardline, which releases Oct. 21. It should also contribute to strong sales for Activision’s Call of Duty: Advance Warfare, which is coming in November, and Take-Two’s PS4/Xbox One rerelease of Grand Theft Auto V, which hits PS4 and Xbox One (along with PC) this fall.

Of course, the next few NPD reports won’t look as good as May’s. Last June, Sony released The Last of Us for PlayStation 3. EA released NCAA Football in July last year, and it won’t have one this time around. In September last year, Take-Two released GTA V to massive numbers. This means the next few months are going to look pretty weak compared to 2013, but we have enough evidence now to suggest anyone making software for the PlayStation 4 and Xbox One will likely have an eager audience — and that should take us into a strong holiday season.

At the end of trading today, here’s where some of the biggest gaming companies stand:

• EA is up 3.05 percent to $36.79
• Take-Two is up 2.18 percent to $21.08
• Activision is up 1.77 percent to $21.81
• GameStop is up 6.81 percent to $40.29

For Battlefield publisher EA, this is a five-year high. It has slowly rebuilt its value since its former chief executive officer John Riccitiello stepped down in March 2013. Activision, which makes Call of Duty, is actually at an all-time high. Take-Two and GameStop are both gaining back some of the losses they incurred over the past few months.