A Wall Street firm initiated coverage of video game software stocks on Monday, rating Activision Blizzard ( ATVI ) and Take-Two Interactive Software ( TTWO ) as buy and Electronic Arts ( EA ) as neutral.
[ibd-display-video id=3030876 width=50 float=left autostart=true] BTIG analyst Brandon Ross said he is positive on the video game industry overall.
"Video game stocks have had a multiyear run as profits have climbed higher and multiples have expanded," Ross said in a report. "While some investors believe the group is nearing a top, we believe there is still significant upside for publishers."
Ross set 12-month price targets on Activision at 80 and Take-Two at 142. He gave no target for EA. By the closing bell on the stock market today , Activision slipped 1.1% to close at 66.01. Take-Two was down 0.8% to 110.32. EA lost 1.8% to 107.34.
Game publishers are benefiting from the transformation of video games from stand-alone packaged media to connected entertainment services, Ross said. The rise of esports, or professional video game sports, is another tailwind, he said.
Activision Blizzard has a hit game this holiday season in historical shooter title "Call of Duty: WWII." It also is doing well in translating its PC and console game franchises into mobile games and esports, Ross said.
IBD'S TAKE:Of the three video game publishers, Take-Two has the highest IBD Composite Rating at 93 out of 99. For more analysis on Take-Two and its peers, visit the IBD Stock Checkup .
Take-Two is positioned for strong sales of its upcoming Western action game "Red Dead Redemption 2" and its "Grand Theft Auto" franchise, Ross said.
EA should benefit from industry tailwinds, but has faced questions about its execution. For instance, it was forced to halt in-game microtransactions in its big game "Star Wars Battlefront 2" in response to customer complaints. Gamers complained that EA's microtransactions in the title, released Friday, amounted to a "pay-to-win" scheme.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
