Welcome to “Game On,” The Fly’s weekly recap of the stories powering up or beating down video game stocks.
Says 2020 might be ‘slower’ year for big releases
In this week’s edition of “Game On,” Stephens analyst Jeff Cohen spoke in an exclusive interview with The Fly about the holiday season for games, the new game consoles coming in 2020, and more.
When asked which of the “big three” U.S. video game publishers would have the strongest holiday sales season, Jeff Cohen said he would pick Electronic Arts (EA). “The strongest individual title will probably be “Call of Duty” (ATVI), and that probably shouldn’t come as any surprise,” he said. “But in terms of the strongest publisher, we think EA is having a really strong holiday with “Star Wars Jedi: Fallen Order,” and that should continue through the holiday season given the movie [Rise of Skywalker] hasn’t even come out and we’re seeing good buzz around that. And we’re seeing good buzz from the Disney+ (DIS) show “The Mandalorian.” So we think EA with “Star Wars” and also the sports titles are having a pretty good holiday season, so we’re going with that one.”
Staying on the topic of EA, the Stephens analyst said he believes the game maker will “definitely” continue to make more titles in the “Star Wars” universe, including ones that focus on single player as well as a return to multiplayer following the 2017 release of “Star Wars Battlefront 2.” “I think they will definitely be continuing to have titles in the ‘Star Wars’ universe,” Cohen told The Fly. “I would say that they’ll probably have titles on both sides of that spectrum, in terms of some experiences that are more single-player like ‘Fallen Order’ that don’t have in-game spending, and other titles with multiplayer similar to ‘Battlefront.’ I do think you might see potential DLC for ‘Fallen Order,’ which the company hasn’t announced yet, but I think because of the success of the main game, there is that possibility that they might be able to do some sort of downloadable content next year. I would also expect Respawn to be working on a sequel of ‘Fallen Order’ given its success. But I do think we’ll see more multiplayer from their ‘Star Wars’ franchises as well. So the answer would be both.”
Last month, Activision Blizzard CEO Bobby Kotick said that he sees “no reason” the company can’t reach 1B users in the next five years. When asked if he agrees with this projection, Cohen said he does. “I agree with that, and if you look at gaming across mobile, console, and PC, we’re kind of already there,” the analyst said. “I think the industry number that’s usually talked about is 2.6B gamers worldwide. A big part of Activision’s strategy has been to bring a lot of their console IP to mobile, so you’ve seen a ton of success with ‘Call of Duty Mobile’ since they had that launch. In 2020, you’re going to have ‘Diablo Immortal’ come out and probably be really big over in Asia. So I do think what Bobby said makes a lot of sense. I think they’ll get there.”
Earlier this month, Take-Two’s (TTWO) 2K games announced the founding of Cloud Chamber, a new video game development studio under the company’s publishing label that had already started to work on the next iteration of the “BioShock” franchise. When asked if a new “BioShock” can still be a serious driver of sales, considering the last game in the series came out in 2013 and a completely new team is working on the next game, Jeff Cohen said he still thinks it would be. “‘BioShock’ is a franchise that has sold, I believe, over 33M units across its releases. It’s one of the highest-rated FPS games of all time,” he said. “So I think there is a core fanbase that’s very excited about it. We still don’t know timing, and I think in the press release they talked about the fact that the game still has several years of development. So it’s not necessarily a near-term catalyst for Take-Two, but I do think there is definitely a fanbase that will be very excited when that game comes out, similar to ‘Borderlands,’ which hadn’t had a mainline release in a number of years and came out [this year with ‘Borderlands 3’] with great success.”
On the subject of new upcoming consoles for 2020, including the PlayStation 5 (SNE) and Xbox Series X (MSFT), and whether the launches will affect publishers’ 2020 pipelines, the Stephens analyst said that publishers have been seeing the details on these systems before they were announced to the public, but noted that 2020 might be a “slower year” in terms of big game releases. “The publishers have been seeing the details on these way before they’re announced to the public, so I don’t think anything that’s come out has been a surprise to any of the publishers,” Cohen told The Fly. “What I would say is we have noticed there’s kind of a trend that 2020 is going to be a bit of a slower year in terms of big releases. EA is going to have ‘Battlefield’ come in 2021. Take-Two has not announced yet what their big release will be for next year, so we don’t if they’ll have anything. Then on the Activision side you’ll have ‘Call of Duty,’ but other than that it doesn’t seem like there’s any big releases from them. So maybe because of the console cycle, publishers are waiting until the install base gets a little bigger. But I wouldn’t say that’s a new development. These pipelines are set pretty well in advance.”
Originally Posted on December 17, 2019 – Game On: Stephens’ Jeff Cohen Sees EA Having Strongest Holiday Season
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from The Fly and is being posted with permission from The Fly. The views expressed in this material are solely those of the author and/or The Fly and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.