While the COVID-driven joiner-churn in the interactive media sector is likely to have subsided, increases in gamer budgets may persist, according to BofA Securities.
The Interactive Media Analyst: Omar Dessouky reinstated coverage of Electronic Arts Inc. (NASDAQ:EA) with a Buy rating and a price target of $166. In a separate note, the analyst also reinitiated coverage of Take-Two Interactive Software, Inc (NASDAQ:TTWO) with a Buy rating and a price target of $213.
The Electronic Arts Thesis: Respawn “is emerging as a robust source of new, high quality content, Dessouky said in the note.
“IDC sees an incremental 46Mn connected consoles in use by 2025, xBox executives expect to drive Game Pass subscribership from 25Mn to 100Mn over time, and global cloud-streaming MAUs are forecast to quadruple to 120Mn by 2025,” he added.
“Moreover, EA’s leading franchises have the deepest moats in the industry making share retention amidst a proliferation of platforms and engagement models highly likely,” the analyst mentioned.
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The Take-Two Interactive Software Thesis: The fiscal 2023 and fiscal 2024 release pipeline is the largest in the company’s history, while its total addressable market is at least 40%-50% larger than its last major release cycle,” Dessouky said in the note.
“We think the larger installed base, new mobile platforms, and cloud gaming services implies that even lesser known titles (among investors) such as Borderlands (15Mn units), BioShock (14Mn units), or Civilization (11Mn units) could sell 50% more units at retail prices 16% higher,” the analyst wrote. “Thus, we view our forecast of 35% CAGR Full Game sales through FY24 as reasonable,” he added.
