Activision, EA, Take Two Have Catalysts for Longer-Term Growth -- Oppenheimer

The videogame industry has some near-term headwinds in 2020 but also a bright future, an Oppenheimer note focused on Activision Blizzard, EA and Take Two says.
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The videogame industry is in transition this year but will get a boost as the next generation of gaming consoles hits the market in 2021 and beyond, Oppenheimer analysts said.

In a note the firm focuses on the big three videogame makers: Activision  (ATVI) - Get Report, Electronic Arts  (EA) - Get Report and Take-Two Interactive  (TTWO) - Get Report.

Oppenheimer analyst Andrew Uerkwitz expects a competitive first half for single-player  role-playing/action adventure games, while the second half is dominated by the release of Microsoft’s  (MSFT) - Get Report highly anticipated Halo Infinite first-person shooter videogame.

“For our coverage (ATVI, EA, and TTWO), 2020 is a lackluster transition year before we see more meaningful growth in 2021 and 2022. The competition is stronger than ever, but we have reasons to stay optimistic,” Uerkwitz wrote.

For Activision, the Oppenheimer analyst says, the release of Overwatch 2 should help a company whose “ability to build sustainable hardcore mobile franchises remains uproven given the mobile market’s competitive nature.”

At EA, Uerkwitz expects more stable incremental growth, thanks to a “cleaner product line and more visible slate.” EA will “double down on sports titles while maintaining a solid foundation in FIFA.”

Finally, Take-Two is well positioned because while the near-term outlook lacks visibility, the company still has “one of the most enviable pipelines.” Take-Two’s Grand Theft Auto and NBA 2K franchises are some of the videogame world’s most popular titles.

Overall, Oppenheimer is bullish, seeing strong console cycles with the new generation of consoles expected to arrive in 2020; robust pipelines for the big three game developers, and underwhelming early returns from cloud-streaming gaming platforms from Apple  (AAPL) - Get Report and Google  (GOOGL) - Get Report.

At last check shares of Activision were 0.2% higher at $59.77; EA was up 0.7% at $110.33 and Take-Two added 0.5% to $127.25.