Shares of Take-Two Interactive (TTWO) were rising on Wednesday following a ratings upgrade to outperform by Cowen analysts. The analysts also raised their price target to $113 from $103.
The stock was rising 3.55% to $100.27 a share, with Cowen's new price target reflecting almost 14% upside.
"The console-facing portion of the video game group is heading into an 18-month period that historically has provided a significant tailwind for share performance (summer followed by the run-up to a new console cycle)," wrote analyst Doug Creutz in a note out Wednesday. "We believe TTWO shares are the best vehicle for exposure to this window."
Creutz wrote that he expects new game console launches by 2020, which usually correlates with higher game sales. He said Take-Two has an advantage over peers in recent management execution, revenue exposure to consoles and valuation. Indeed, Take-Two trades currently at a forward 12 months earnings multiple of 20.21, a slight discount to Electronic Arts' (EA) 21.53. On a trailing multiple basis, Take-Two trades at 31 times earnings, while Ubisoft (UBSFY) trades at a trailing multiple of 35.
While Take-Two has seen a weak sales start to its Red Dead Redemption game,Creutz pointed out that Ubisoft "also has issues with growth comps and is far more expensive, and while EA is relatively cheap and has a potential growth driver in Apex Legends, recent execution has been poor."
Take-Two shares are down 6.9% this year.