Who's Winning the Console Wars

S&P's Clyde Montevirgen says the Xbox 360 leads in total sales, but Nintendo's Wii showed the strongest launch numbers. His pick in the sector: Activision

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January 23, 2007 at 1:35 AM UTC

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Just like gamers, holders of video-game stocks should be prepared for battle and adventurous twists and turns. Last year's wild ride, when the group got crushed in July and then soared in the fall as Sony's (SNE) PlayStation 3 and Nintendo's Wii were released, left the S&P Home Entertainment Software index with a small gain of 3.7%, vs. 13.6% for the S&P 500. So far this year, the group has stayed on a higher path, gaining 2.7% through Jan. 12, vs. a 0.9% rise in the S&P 500 index. One boost came Jan. 11, when key player THQ (THQI) hiked its sales and earnings outlook.

Given lofty valuations after the recent price runup, along with some uncertainty about the timing of launching hit titles, Standard & Poor's Equity Research analyst Clyde Montevirgen has a neutral outlook for home entertainment software stocks (see BusinessWeek.com, 12/21/06, "Part 2: S&P's 2007 Tech Sector Outlook"). He has a buy recommendation on one stock: Activision (ATVI).