There has been a fair amount of buzz around videogame stocks so far this year.
New consoles from Microsoft (NASDAQ: MSFT) and Sony (NYSE: SNE) have both said that their next generation gaming consoles will be released at the end of this year, just in time for the 2020 holiday shopping season.
With new consoles, comes a fresh catalyst for videogame stocks and Piper Sandler analyst Michael Olson says three stocks in the sector will dominate this year.
For Take-Two, Olson says the stock could jump to $141 over the next twelve months, or nearly 11%.
“We see potential for EPS upside [for the December quarter] driven by Outer Worlds, Borderlands 3 and GTA Online,” Olson wrote regarding Take-Two. “Investors are likely eyeing a jump-start to Red Dead Online, but in the near-term, we look for strong continued monetization in GTA Online.”
Moving on to EA, Olson has a $124 price target on the stock – 11% higher than the stock’s price as of this writing.
While EA shares are currently down around 6% in after-hours trading following its earnings releasee, it did report adjusted revenue of $1.98 billion for its fiscal third-quarter, beating analysts’ estimates of $1.97 billion. However, its guidance for revenue for the current quarter came in just below consensus estimates of $1.2 billion at $1.152 billion.
“It was an excellent third quarter, with our new games and live services delighting more players around the world,” said CEO Andrew Wilson in the company’s earnings release.
Still, Olson says EA could see “potential upside driven by Star Wars Jedi: Fallen Order.”
EA said on its earnings call that the single-player Star Wars adventure game is on track to hit 10 million unit sales.
“Sales of Star Wars: Jedi Fallen Order significantly beat our expectations,” said CFO Blake Jorgensen, who noted that EA had originally predicted the game to sell between 6 and 8 million units for the fiscal year.
As for Activision Blizzard, Piper Sandler has a price target of $69 on the stock – 13% higher than the current price.
“We believe Activision is best positioned among its peers, potentially through the next two years, as the installed base of consoles ramps,” Olson wrote.
Olson expects Activision will see a benefit from better monetization of its Call of Duty: Modern Warfare game this year compared to its Call of Duty: Black Ops game, while also citing the strong performance of its Call of Duty Mobile smartphone game.
Instinet analyst Andrew Marok is bullish on Activision as well, recently rating the stock a Buy and issuing a $70 price target.
“We think ATVI is well positioned over the medium term, with pipeline visibility and mobile opportunities providing runway for share price appreciation,” Marok wrote in a note. “Even with what we believe are conservative assumptions, we see a compelling case for share price appreciation.”