JP Morgan Boosts Game Software Names
JP Morgan upgraded its investment recommendation on each of Electronic Arts (ERTS ), Take-Two Interactive (TTWO ), and THQ (THQI ) to overweight from neutral.
Analyst Dean Gianoukos sees significant upside as the video-game industry heads into the next console cycle. He continues to expect earnings per share for Electronic Arts, THQ, and Activision (ATVI ; already at overweight) to decline or increase slightly next year as the industry struggles with the end of the current cycle and lower software pricing in calendar 2005. But his overweight ratings are based on next cycle peak EPS estimates of about $2.85 for Electronic Arts, $2.20 for THQ, $1.10 for Activision, and $3.75 for Take-Two. Gianoukos says if the companies hold their 5-year average relative multiples on peak EPS, each could provide significant upside -- and potentially the most appreciation among the leisure companies he follows.
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