The interactive gaming industry is poised for continued growth as it moves from static purchases or rentals of games to an online model — and as broadband internet becomes faster and more widely available, Nomura Instinet said in an initiation of two gaming players.
Andrew Marok initiated coverage of Electronic Arts Inc. (NASDAQ: EA) with a Buy rating and $120 price target.
Marok started coverage of Activision Blizzard, Inc., (NASDAQ: ATVI) with a Neutral rating and $49 price target.
The gaming sector is attractive overall, with a market that could expand to reach $200 billion in five years, Marok said in a Wednesday note. Much of that growth is expected to be concentrated in the mobile segment, he said.
The global video gaming market generates more than $130 billion in revenue annually across mobile, PC and console formats, the analyst said.
The industry should see an expansion of the potential base of players fueled by increasing broadband penetration, Marok said. But the industry is also finding ways to boost players’ engagement with games over time, he said.
“Far removed from the days of one-time static purchases, games today are often based on a service model that allows for post-launch updates and content releases,” the analyst said.
“In addition, gaming content is increasingly delivered digitally. Both factors are individually favorable to margins (post-launch content often does not require the same development outlay as formal launches), and the combination creates a notable tailwind for the industry.”
E-sports, Cloud Opportunities
Marok named the following potential industry catalysts in the initiation note:
- E-sports, a category he said is in the proof-of-concept stage and is likely to grow.
- Cloud gaming, which the analyst said has the potential to broaden the accessibility of games.
Electronic Arts and Activision are both poised as industry leaders to benefit from broader, favorable industry trends, he said.
Nomura favors Electronic Arts over Activision at this point due to the companies' upcoming release schedules, with Activision lagging Electronic Arts slightly on this front, the analyst said.
Electronic Arts shares were down 0.7 percent at $38.50 at the time of publication Thursday, while Activision shares were down 1.17 percent at $44.
Gamers Rejoice: You've Got Another ETF
Photo courtesy of Electronic Arts.
Latest Ratings for EA
|Jun 2019||Initiates Coverage On||Buy|
View More Analyst Ratings for EA
View the Latest Analyst Ratings
See more from Benzinga
- Reports Of Developer Shakeup On 'Call Of Duty' Hit Activision Blizzard's Stock
- Street Mostly In The Game On EA After Strong Quarter, Bullish 2020 Outlook
- Electronic Arts Analyst Stays Neutral Ahead Of Q4 Report, Says Upcoming 'Star Wars' Title 'Pivotal'
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.