Game Console Cycle Looks Bright For Activision, EA
The current video-game-console cycle still has room to run, providing upside for top game publishers like Activision Blizzard ( ATVI ) and Electronic Arts ( EA ), Piper Jaffray analyst Michael Olson said Wednesday. Olson reiterated his overweight ratings on Activision and EA stock in separate reports. He has a price target of 39 on Activision and 87 on EA. In afternoon trading on the stock market today , Activision was up over 1% to above 31 and EA was up 1.5% to above 62. “The console cycle is in its third year and investors are beginning to ask if we are nearing the ‘peak’ of this cycle,” Olson said. “While some that own these stocks for the ‘cycle trade’ may be selling, we believe there are arguments to be made that consistent growth will come over the next several years and an ongoing mix shift towards digital that will drive margins higher.” Current-generation console uptake rates have outpaced the previous generation, but the installed base has “significant room to grow,” he said. The current-generation consoles are Sony ‘s ( SNE ) PlayStation 4, Microsoft ‘s ( MSFT ) Xbox One and Nintendo ‘s ( NTDOY ) Wii U. “While the uptake rate of hardware in the current console cycle has been tracking 40% to 50% faster than the prior cycle, we believe growth of the installed base is far from over,” Olson said. “Specifically, at this point in the cycle about 40% as many consoles (Xbox One & PS4) have shipped compared to life-to-date shipments of prior-gen consoles (Xbox 360 & PS3).” Sales of previous-generation consoles (Xbox 360 and PS3) reached about 162 million units, while current-generation consoles (Xbox One and PS4) have sold about 60 million so far, he said. RELATED: Activision Blizzard Whiffs On Q4 EPS, Sales; Stock Sinks Electronic Arts Falls On Mixed Q3, Weak Guidance .