XAutoplay: On | OffThe major video game publishers are poised to continue benefiting from the shift to digital distribution and extended gameplay through services and downloadable extras, Mizuho Securities analyst San Phan said in a report Monday.
He reiterated his buy ratings on Activision Blizzard (ATVI) and Electronic Arts (EA) following their successful product showings at the E3 video game conference last week in Los Angeles. Phan raised his price target on Activision to 65 from 58 and on EA to 124 from 115.
Activision shares were up 1.8%, near 59.80, in afternoon trading on the stock market today. EA stock was up 1.9% to 112.60 on Monday.
“Post-E3, we are more bullish on their key titles and digital prospects,” Phan said in a note to clients. “With a clearer path to revenue growth, higher recurring digital sales, and margin expansion, we believe ATVI and EA continue to get re-rated among investors and warrant slightly higher target multiples.”
IBD’S TAKE: For a roundup of news from the E3 conference, visit the IBD news page titled E3 2017: Video Games, Virtual Reality, Entertainment News.
Phan said he walked away from E3 with increased confidence that key game publishers will continue to post sustainable growth with bigger and better games evolving toward live services.
“The opportunity to drive and monetize growing player engagement with continuous content updates is large, and coupled with a growing shift towards digital distribution, should fuel revenue growth and margin expansion for the key publishers in our coverage universe,” Phan said.
Among the “standout” games showed at E3 2017 were “Destiny 2” and “Call of Duty: WWII” from Activision and “Star Wars Battlefront 2” from EA, he said.
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