Shares of video game makers are in focus this week as this year's Electronic Entertainment Expo, or E3, continues. In response to all the presentations from major publishers and hardware providers, Piper Jaffray analyst Michael Olson maintained Overweight ratings on Activision Blizzard (ATVI), Electronic Arts (EA), and Take-Two (TTWO), saying that the "light" upcoming pre-holiday launch window could actually be a positive for the "big three" gaming stocks.
E3 TAKEAWAYS: The Piper analyst said in a research note to investors that 2019's pre-holiday launch window, which the same analyst said last week would be the main focus of the event, will be "relatively light" compared to last year, which could be a positive for those titles that are schedule for release this year, given gamer dollars will theoretically be more concentrated. Olson noted that this year's focus titles include Activision's "Call of Duty: Modern Warfare," Take-Two's "Borderlands 3," EA's "Star Wars Jedi: Fallen Order," Ubisoft's (UBSFY) "Ghost Recon: Breakpoint," and Bethesda's "Doom Eternal." Besides the new "Call of Duty," Olson said he does not expect any of these games to achieve more than 10M units in 2019.
Meanwhile, the analyst noted that Microsoft (MSFT) provided further details on "Project Scarlett," its next generation Xbox console slated for a holiday 2020 release, and that while Sony (SNE) did not host a press conference, it has indicated that the PlayStation 5 will also roll out next year. Olson continues to believe there will be multiple versions of each console, including some that do not contain an optical drive, thereby pushing more consumers to full game downloads. In addition, he noted that Microsoft did not provide as many details on its streaming service xCloud as Google (GOOG) did with its Stadia service, and added that he believes consoles will continue to "rule the gaming landscape" in the next two years, with streaming gaining traction in about three years. The Fly notes that Stadia will be available for Founder's Edition buyers later in 2019 with a larger rollout in 2020.
ACTIVISION: Michael Olson said patient investors should "take a closer look" at Activision, noting that the focus for the company at E3 was on "Call of Duty: Modern Warfare," as there is not anything else major coming this year. The analyst said that 2020 looks "far more interesting" for the company, with a "World of Warcraft" expansion on the way, as well as contributions from "Diablo Immortal" and "Call of Duty Mobile," along with the potential for either "Diablo 4" or "Overwatch 2." Activision Blizzard did not have a traditional press conference at E3 this year.
EA: While Electronic Arts was not present at E3, it hosted an EA PLAY event on Saturday in Los Angeles, during which it provided new details on "Jedi: Fallen Order" and Season 2 of "Apex Legends." The Piper analyst said that, based on what he saw, he believes the company's guidance of 6M-8M units shipped for the new "Star Wars" game "appears reasonable."
TAKE-TWO: Olson noted that the previous version of Take-Two's "Borderlands" sold 7.5M units in 12 months, so his firm's estimate of 6M in fiscal 2020 could prove conservative for "Borderlands 3." Meanwhile, Take-Two-published game "The Outer Worlds," whose developer Obsidian was acquired by Microsoft last year, ships on October 25. The analyst said he is only modeling 3M units for this game, so there could be upside to this with the tailwind of Microsoft marketing the game, as the technology giant opened its E3 presser with a trailer for the game.
Just after noon, shares of Activision Blizzard were 2.4% lower, EA shares were down 2.3%, and Take-Two was down about 1%.
Keywords: video games, e3, apex legends, jedi fallen order, call of duty, stadia, xcloud, borderlands