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The Zacks Analyst Blog Highlights: Activision Blizzard, King Digital Entertainment, Twitter, Electronic Arts and Take-Two Interactive Software

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 For Immediate Release
 
Chicago, IL – November 23, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Activision Blizzard, Inc. ((ATVI - Free Report) ), King Digital Entertainment plc (), Twitter, Inc. ((TWTR - Free Report) ), Electronic Arts Inc. ((EA - Free Report) ) and Take-Two Interactive Software Inc. ((TTWO - Free Report) ).           
           
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Here are highlights from Friday’s Analyst Blog:      
                      

Time to Play: Activision & 2 Other Video Game Stocks to Buy

It seems that Activision Blizzard, Inc. ((ATVI - Free Report) ) has attracted the attention of Wall Street in a big way. Within a span of a few days, the company announced an unexpected acquisition and strong third quarter 2015 results, paving its path to become a broad-based entertainment company.

Of the two, the bigger driver of conversation was undoubtedly Activision’s acquisition of Candy Crush maker King Digital Entertainment plc () for $5.9 billion.

The deal will help Activision Blizzard to expand its presence in the lucrative mobile gaming business. As per Activision, the mobile gaming industry is expected to generate $36 million in revenues by 2015, and from 2015 to 2019, it is expected to register cumulative growth of 50%. Activision, the maker of Call of Duty and War of Worlds, has however had limited presence in the fast-growing mobile games arena.

Another key aspect of the deal is that Activision Blizzard, which has a strong male gamer dominated base, will now have a sizeable female user base. King Digital’s iconic games Candy Crush and Candy Crush Soda saga are hugely popular with women. With over 500 million users in 196 countries, Activision Blizzard is now ahead of Twitter, Inc. ((TWTR - Free Report) ) as well as Instagram.

Following the acquisition news, the company announced the launch of a film and television unit, Activision Blizzard Studios. As per Activision, “Activision Blizzard Studios is not just an exciting new business for our company; it is a synergistic complement to our core business. Our movies and shows will benefit from the remarkable IP created in our games and will further increase the awareness of, engagement with and passion for our franchises.” In October, the company launched an e-sports unit for a foothold in the lucrative e-sports business.

Plus, the company’s most anticipated title of the holiday season Call of Duty: Black Ops 3 opened to a thunderous response. Black Ops 3 garnered $550 million, globally, in its opening weekend, which makes it the biggest entertainment debut across movies, books and music albums launched so far in 2015. The phenomenal success was driven by a 100% rise in digital downloads. With mostly positive reviews, analysts expect the edition to sell as many as 22 million copies in a year, making it the sixth title in the franchise to cross the billion-dollar mark.

Black Ops 3 has broken a few other records as well. Activision stated that fans played more than 75 million hours in the first 72 hours, setting a new record for the franchise.  It even set the record of being the most streamed and most viewed game of 2015 as per Twitch TV. Call of Duty: Black Ops 3 was the best selling game (by units sold) in its first day of availability in PlayStation 4’s history.

The All-Important Holiday Season

As for the holiday season, it is the most important time of the year for video game companies as new games feature high on shopping lists. Gaming companies derive a significant chunk of their annual revenues in this all-important quarter.

The video game sector is inherently a ‘’hit driven” sector. As a result, most of the gaming publishers reserve their premier titles for the last three months of the year to capitalize on the shopping frenzy.

However, the popularity of video games is not confined to the holiday season as these have a significant place in an average American’s life. According to the Entertainment Software Rating Board (ESRB), 67% of U.S. households play video games, with the average age of the U.S. gamer being 34 years. Moreover, revenues from the industry are expected to jump from $78.87 billion in 2012 to $111 billion by the end of 2015.

In fact, 2015’s holiday season has the largest number of releases lined up, dwarfing previous records. As per a CNBC report, “The number of top-tier titles coming out in the fourth quarter of 2015 is arguably bigger than any previous year in the industry's history. And that's critical, since this is the year that game console manufacturers Microsoft, Sony and Nintendo really start the heavy push to get owners of older consoles to swap those in for an XboxOne, PlayStation 4 or Wii U.”

Activision’s holiday campaign is off to a brilliant start with Black Ops 3’s phenomenal performance. With a Zacks Rank #1 (Strong Buy), long-term EPS growth rate of 12.5% and 86% increase in share price year-to-date, Activision remains a stock to watch out for in the video game space.

2 Other Video Game Stocks to Bet On

Apart from Activision, we bring you two more stocks in the video game space that may be valuable additions to your portfolio.

Electronic Arts Inc. ((EA - Free Report) )

Electronic Arts released its much anticipated video game Star Wars Battlefront a couple of days back. Battlefront was touted as one of the biggest video game releases of the year. The hysteria surrounding Star Wars: The Force Awakens added to the already hyped release. Electronic Arts at its second quarter fiscal 2016 earnings conference call had said that it now expects to sell 13 million copies of Battlefront by Mar 2016, up from the earlier projection of 9 to 10 million units.

Despite mixed reviews, analysts are confident that the title will sell over 13 million copies, given the seasonal impact of the holiday season and the excitement related to the first Star Wars movie in a decade.  

EA has also made strides on the operational front. After suffering deteriorating sales and profitability for a few years, the company turned to quality control, setting a new goal of maintaining a lower number of game titles.

We believe a portfolio of well known video game franchises like Madden Football, FIFA, NBA Live, Battlefield and Need for Speed should continue to drive the top-line going forward. The company recently upgraded its fiscal 2016 outlook.

Shares of this Zacks Rank #1 stock have soared over 51.7% so far in the year. The company’s long-term EPS growth rate stands at 15.6% as against 13% for the industry.

Take-Two Interactive Software Inc. ((TTWO - Free Report) )

Take-Two Interactive is a leading worldwide developer, publisher and distributor of interactive software games. They are one of the largest distributors of interactive software games in the United States and one of the top publishers of interactive software games in Europe.

The company recently posted stronger-than-expected numbers in the second quarter of fiscal 2016 driven by strength of new titles like NBA 2K16. Even two-year old titles like Grand Theft Auto 5 and Grand Theft Auto Online continued to perform well and contributed to strong results.

Though the company does not have a big release for the holiday season, except WWE2K, its long-term growth prospects are intriguing given the “faster-than-expected sale of a new generation of consoles” and the rise in digital sales. In the fiscal second quarter, the company’s digital sales grew 57% year over year.

Analysts observe that with titles like Battleborn and Mafia III, lined up for release next year, the company is poised for strong growth next fiscal year.

Take Two currently carries a Zacks Rank #2 (Buy) while its long-term EPS growth rate stands at 12.5%. Shares have increased over 23.2% year to date.

Conclusion

Given the insatiable appetite of the gaming community, gaming stocks will continue to present impressive opportunities, especially going into the holiday season.

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