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Videogame companies are already looking ahead to the next holiday season, with a new generation of gaming consoles on the way later this year. And new consoles historically have been great for videogame stocks.
In 2013, the year the PlayStation 4 and Xbox One both launched in November,
Activision Blizzard
(ticker: ATVI) stock gained 69%, while Electronic Arts stock (EA) rose 58%. This year,
Sony’s
PlayStation 5 and
Microsoft’s
Xbox Series X will be out in time for holiday shoppers.
Benchmark analyst Mike Hickey is bullish on both
Activision Blizzard
and
Electronic Arts.
He raised his price targets for the two stocks, adding that they are among Benchmark’s top picks.
For Activision, he forecasts earnings and revenue growth through fiscal 2022. He expects investor sentiment to improve, while new consoles, online transactions from existing games, and a strong pipeline of coming games can drive gains for the stock.
He also noted strong results from Call of Duty: Mobile, and Call of Duty: Modern Warfare. The mobile game hit 100 million downloads in its first month, while Modern Warfare was the company’s top-selling digital opening ever.
Modern Warfare seems to be doing better than the previous two titles, in terms of sales, according to Hickey. That’s be a surprise, given the company’s original outlook implied sales would be down from 2018’s game. Record engagement for Modern Warfare’s multiplayer component also signals its Battle Pass model is working.
For EA, Hickey expects management to raise its fiscal 2020 financial outlook when the company announces fiscal third-quarter earnings, expected Jan. 30. He also expects sales and earnings above EA’s outlook, citing key releases like Jedi: Fallen Order, Apex Legends Season 3, Need for Speed Heat, and Plants vs. Zombies: Battle for Neighborville.
Hickey raised his Activision price target to $72 from $68. He also raised his price target for EA stock to $137, up from $129.
Activision is among Barron’s top picks to play this year’s most important tech trends, in this case the PlayStation 5 and Xbox Series X. Take-Two Interactive stock should also benefit.
Shares of EA rose 1.5% on Monday. Activision stock closed up 1.8%, while Take-Two stock (TTWO) gained 2%.
Write to Connor Smith at connor.smith@barrons.com
