Updated from Friday, June 6, with views from Bank of America Merrill Lynch on Take Two.
NEW YORK (TheStreet) -- New content, software and titles are expected to take the spotlight at this year's E3 Electronic Entertainment Expo in LA, raising the odds investors are going to trust that the upcoming console cycle will be a thriving one, and that the sector will continue to deserve their attention.
Gone is the cautious atmosphere of last year's E3. The early successes of the current console cycle heading into the event has greatly alleviated 2013's worries that the Nintendo (NTDOY) Wii U's failure to take off was a bad sign for the Xbox One and PS4. With Xbox One and PS4 sales already burgeoning early on in the cycle, Sterne Agee analysts are estimating that the installed base of Xbox One and PS4 could grow to up to about 100 million units for each by the end of the current cycle even though PS4 sales are currently stronger than Xbox One sales. That's up from 80 million units from the prior cycle.
The annual E3 game conference will officially take place from June 10 to June 12 in Los Angeles, with presentations trickling in starting June 9.The success of these two consoles so far has helped fuel good performance in the games group overall in the recent quarters. "We expect this trend to continue over the next 12 to 24 months as software sales turn positive later this year and set the stage for top-line acceleration next year," Sterne Agee's interactive entertainment analyst Arvind Bhatia said in a client note. Strong software availability is, of course, key to driving hardware sales in the long-run and is a forward-looking data point of great interest to investors. With that being said, the upcoming E3 should bolster confidence that the early successes of Xbox One and PS4 will be sustainable beyond the early adopters, offsetting the impact of Nintendo's weakness on the games group. At the upcoming event, Bhatia is expecting a strong lineup of next-gen titles for both the PS4 and Xbox One, with console-makers in particular aiming to highlight exclusive IPs as a way to differentiate themselves from the competition, given that price is no longer a differentiating factor. For instance, Microsoft (MSFT) recently announced a Kinect-less Xbox One for $399 coming on June 9, which matches the price of the PS4 from Sony (SNE). Various Wall Street and industry analysts dive into the details of the content they're anticipating at this year's E3, by developer, publisher and console maker. Ubisoft What Sterne Agee says: Ubisoft has a good track record when it comes to E3. In the past, the company has been able to showcase its titles well and has been successful in throwing in a few surprises, such as the 2012 reveal of Watch Dogs. There should be a strong showing from the company again this year. Key titles in focus will be Assassin's Creed Unity, Far Cry 4, Tom Clancy's The Division and The Crew. It wouldn't be surprising if management decided to share sell-through data on the recently released Watch Dogs title. What Enders Analysis's Heloise Thomson says: There will definitely be a lot floor space dedicated to Ubisoft's Assassin's Creed Unity, where the protagonist will be returned to an urban historical setting (during the French Revolution). This is ideal for actual stealth-play rather than obvious battles on land and the high seas. "I enjoyed the relaxed nature of Black Flag but it's not as engaging as creeping around recognizable landmarks and narrow streets." Assassin's Creed Unity is expected to be released during the fourth quarter of 2014.
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