Analyst downgrade leads to Take-Two Interactive Software stock drop

|


  • Gaming company’s shares fall 4.5%
  • Rival Electronic Arts’ stock rises by 5.2%
  • Activision Blizzard Q4 revenue expected to exceed $3 billion

BMO Capital downgraded Take-Two Interactive Software, and the gaming company’s shares fell by 4.5% on Tuesday. In addition to dropping share prices, the company was hit by analyst Gerrick Johnson cutting his price target from $119 to $80.

New York-based Take-Two Interactive develops and publishes successful games such as Grand Theft Auto, Max Payne and Red Dead.

Johnson cited a “hype machine” running for the past two years for Take-Two Interactive’s “Red Dead Redemption 2” title and how the buzz around the game had “dissipated markedly” after a strong premiere.

In his note to investors, the analyst also raised concerns that a lapse in game engagement could affect the company’s ability to achieve “desired levels” in the monetization of the release.

Adding that disappointing results by video game companies have sent the sector down in the past few months as high valuations came under scrutiny, Johnson wrote that he sees Take-Two as being at risk from a broader downturn.

Rival Electronic Arts saw its stock rise by 5.2% to trade at $102.33 per share on Tuesday, riding a wave of success generated by Apex Legends – its newest multi-player shooter.

In a recent client note, Johnson referenced the impact the new game was having on the company when he wrote: “EA now has a solid entry into the battle royale genre that is generating a lot of buzz and dominating Twitch viewership since release.”

Another rival in the gaming sector, Activision Blizzard, who are responsible for Call of Duty, World of Warcraft and Overwatch, are expected to report adjusted fourth-quarter earnings per share of $1.28 with revenue exceeding $3 billion.

Brian Ducey

Brian graduated from Chaminade High School and the University Of Vermont Kalkin School Of Business with a concentration in Finance. He began his career with Knight Capital Markets, working his way to market maker. Brian later expanded his market repertoire, working with various sell-side research brokerage firms, such as Sidoti & Co., and William O’Neill & Co., as an Account Executive. With over 20 years-experience in the financial industry, Brian has built a unique perspective into “market intelligence” understanding an ability to read the tape and apply second level thinking in a fast paced environment. Brian also carried several market licenses, including the series 7, 24, 55, 65, and 63 licenses as well as previously passing The Connecticut Life and Health Insurance Exam