Shares of Take-Two Interactive Software Inc. (TTWO) fell 4.5% to close at $89.25 on Tuesday after BMO Capital downgraded shares of the gaming company to underperform from market perform.
Analyst Gerrick Johnson also cut his price target to $80 from $119. In a note to investors, Johnson said that following a two-year "hype machine" blast for its "Red Dead Redemption 2" title and its "strong" premier, the buzz around the game has "dissipated markedly."
Johnson said that he was concerned that game engagement may lapse and the company's ability to monetize the release to "desired levels" may be pressured. The analyst added that lackluster results by videogame companies have caught up with their high valuations, sending the sector down since the fall. He sees Take-Two as not being immune to the broader downturn.
The New York-based company develops and publishes action/adventure products under the "Grand Theft Auto," "Max Payne," "Midnight Club," and "Red Dead" names through developing sequels.
Johnson said in a recent client note that "EA now has a solid entry into the battle royale genre that is generating a lot of buzz and dominating Twitch viewership since release."
Meanwhile, rival gamemaker Activision Blizzard (ATVI) is scheduled to publish fourth-quarter earnings at the close of trading Tuesday, with analysts expecting the maker of "Call of Duty," "World of Warcraft" and "Overwatch" to report adjusted earnings per share of $1.28 on revenue of just more than $3 billion.