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TheStreet Open House

Game On: Activision Blizzard vs. Take-Two vs. EA

Stocks in this article: ATVIEATTWO

The concern is that Take-Two mightn't be able to replicate its success with new products. Recently, Wedbush Securities downgraded the stock to "neutral" with a price target of $19 due to lack of visibility.

"We believe that investors should be cautious about the company's product pipeline; although Take-Two has consistently produced successful games, it has not produced a sufficient number of them to generate consistent profits," wrote analyst Michael Pachter in a research note.

As for Electronic Arts, its third-quarter sales were weighed down by the release of next-generation consoles, Sony's (SNE) PlayStation 4 and Microsoft's (MSFT) Xbox One, which threw a curveball to demand expectations.

"In the third quarter of fiscal year '14, we had the unprecedented excitement of two new game consoles launching within weeks of each other. With that came the challenge of launching a full slate of EA's top titles for both next-gen and the current-gen consoles," said CEO Andrew Wilson in a post-earnings conference call.

"Our Q3 revenue shortfall was driven by a much sharper decline than anticipated for demand," added CFO Blake J. Jorgensen.

In its December-ended quarter, the Redwood City, Calif.-based company reported sales of $1.57 billion, less than expectations of $1.66 billion.

NPD estimates U.S. sales of software for the PS3 and Xbox 360, older-generation consoles, dropped 35% over the holiday season compared to a year earlier.

However, higher demand for next-gen games at least partially offset weakness. Over December, The Sims creator managed to carve out an early leadership position among next-generation gamers, achieving 40% segment share on the PlayStation 4 and 30% segment share on the Xbox One in the U.S.

Must Read: Current-Generation Sales Prove Taxing for Electronic Arts (EA)

Must Read: Take-Two (TTWO) Falls Despite Posting Record Earnings

Must Watch: Grand Theft Auto Win Can't Save Take-Two From Poor 4Q Guidance

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