Videogamers still have a lot to look forward to in 2020, with new consoles from Sony and Microsoft due out later this year
A new generation of videogame machines usually means a better experiences for players—improved graphics, more sophisticated games and, of course, a host of new titles. But it also creates opportunities for investors.
In the year following the last console releases from Microsoft (ticker: MSFT) and Sony (SNE) in November 2013, stocks of game publishers easily outperformed the market. A basket of gaming stocks, including Activision Blizzard (ATVI), Electronics Arts (EA), and Take-Two (TTWO), rose roughly 40% to 50%, compared with 14% for the
and 24% for the
according to KeyBanc analyst Tyler Parker.
On Thursday, Parker wrote in a note to clients that this year’s releases—the Xbox Series X from Microsoft and the PlayStation 5 from Sony—will be of particular benefit to
Take-Two Interactive Software.
and French gaming publisher
(UBI.FR) might not see the same boost.
On Thursday, Parker wrote that Activision’s coming slate of games, including Overwatch 2 and Diablo 4, positions the game maker to take advantage of the new consoles from Sony and Microsoft. Parker raised his price target for Activision to $83 from $80, because of the upcoming title Crash Bandicoot 4: It’s About Time and another smaller game. Parker rates Activision the equivalent of Buy. The stock was up 0.7% Thursday afternoon to $76.07.
Overwatch and Diablo are examples of so-called AAA games, the major releases that are the videogame equivalent of summer blockbuster films. They involve big budgets and are high stakes for the producers behind them.
There are no AAA games in the makings for Take-Two in fiscal 2021, but the company’s five-year timetable has a planned 93 launches. “[The number of releases] is tough to comprehend, but we take comfort in the fact that management historically has a high hit rate of success for game releases, so the games that do make it to market are likely to be high quality,” Parker wrote.
Parker rates Take-Two at the equivalent of Buy with a price target of $160. Shares of Take Two were up 0.2% Thursday afternoon to $140.15.
Despite EA’s strong balance sheet, Parker is lukewarm on the stock. The analyst cites minor delays for FIFA, its top-tier soccer game, and for its popular Madden football games. Those delays could be somewhat offset by EA’s upcoming Star Wars: Squadrons game. Parker has the equivalent of a Hold rating on EA. Shares were down 0.1% Thursday.
meanwhile, has an ambitious publishing schedule for the coming year, with five AAA titles set to launch. But Parker cautions that three of those games have been delayed already and executives widened the company’s financial guidance in May, which could signal further delays.
In the short term the coronavirus has created significant opportunity for videogame companies with most people stuck at home. Shares of Activision are up 28% this year, while EA and Take Two are up 21% and 14%, respectively.
Write to Max A. Cherney at firstname.lastname@example.org