"Game On" is The Fly's weekly recap of the stories powering up or beating down video game stocks.
NEW RELEASES: On the software side, this week's major release is Electronic Arts' (EA) hockey sim "NHL 21," out October 16 for PlayStation 4 (SNE) and Xbox One (MSFT). On the hardware side, Nintendo (NTDOY) is rolling out "Mario Kart Live: Home Circuit" on October 16, a racing game that allows users to control a radio-controlled car with their Nintendo Switch consoles to play through "Mario Kart" courses using augmented reality.
APPLE-EPIC: According to media reports, Federal District Judge Yvonne Gonzalez Rogers issued a ruling on Friday that Apple (AAPL) can continue to block Epic Games' "Fortnite" from the iOS App Store as the two sides head to a trial. In the ruling, Rogers restates her previous finding that any harm Epic is currently facing to its "Fortnite" business is self-inflicted, as the company brought about the legal dispute after releasing an update offering a new Epic Direct Payments in-app purchase system for the game on iOS, which was in direction violation of its App Store contract with the tech giant. "In short, Epic Games cannot simply exclaim 'monopoly' to rewrite agreements giving itself unilateral benefit," the judge said in rejecting Epic's request for an injunction restoring "Fortnite" to the App Store. "The current predicament is of its own making." Meanwhile, Judge Rogers determined that any retaliation by Apple against Unreal Engine development, which Epic also owns, on iOS would cause serious harm to the wider development market, including companies not involved in this current legal matter. Investors in Epic include Tencent (TCEHY), KKR (KKR), Disney (DIS), and Sony.
ATVI RATING CHANGES: Earlier, two separate firms changed their ratings on Activision Blizzard (ATVI), with one analyst upgrading the stock and the other downgrading it. BMO Capital analyst Gerrick Johnson downgraded Activision Blizzard to Market Perform from Outperform and cut his price target to $80 from $95. The analyst recommends taking profits after the stock's "extraordinary run," adding that he still believes in the company's long-term strategy and "could be constructive on the shares at a lower valuation."
Meanwhile, Deutsche Bank analyst Bryan Kraft upgraded the stock to Buy from Hold and raised his price target to $90 from $75, saying that the pandemic will continue to be beneficial for the video games business, with or without increased macroeconomic headwinds. The analyst added that he believes the eventual end of the pandemic will result in video games doing better than the market assumes, noting that video game publishing stock shave further upside based on a "high probability" of earnings beats and upward consensus estimate revisions.
GAMESTOP-MICROSOFT: Last Thursday, GameStop (GME) announced that it entered into a multi-year cloud solutions partnership agreement with Microsoft. Under the pact, GameStop will standardize its back-end and in-store solutions on Dynamics 365, Microsoft’s portfolio of cloud-based business applications and customer data platform. Additionally, associates will be equipped with new Microsoft Surface devices. As part of its transformation, GameStop plans to roll out Microsoft 365 and Microsoft Teams to its stores. In addition, GameStop has expanded its Xbox family of product offerings to include Xbox All Access, which provides an Xbox console and 24 months of Xbox Game Pass Ultimate to players with no upfront cost.
Following the announcement, Jefferies analyst Stephanie Wissink reiterated a Buy rating on GameStop, saying the news is a net positive to her thesis, as it embeds three coincident events: GameStop's planned implementation of Microsoft's back office systems, rollout of Microsoft's Surface and mobile tech across GameStop stores, and a revenue sharing agreement for Xbox digital sub value over the lifecycle of the customer.
OTHER STORIES TO WATCH:
Electronic Arts
+0.88 (+0.67%)
acquired by MSFT
+0.5 (+0.62%)
Symbol now SONY
+0.33 (+0.44%)
Microsoft
+1.5 (+0.68%)
Nintendo
+ (+0.00%)
Tencent
+ (+0.00%)
KKR
+0.19 (+0.52%)
Disney
+5.03 (+4.02%)
Take-Two
-0.975 (-0.58%)
GameStop
+0.01 (+0.08%)
Amazon.com
+25.245 (+0.73%)