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Not all videogame firms are made equal in the post-pandemic world. Lockdown orders issued by governments around the world in response to the Covid-19 outbreak have benefited videogame firms, as individuals with nothing else to do turned to interactive entertainment. However, when limitations in the United States loosen, several publishers, such as
Electronic Arts (EA) is a video game
(ticker: EA), for example, may do better than others.
Roblox
Analysts believe (RBLX) is a good investment.
In recent trade, Roblox shares fell 2.8 percent to $84.16, while EA stock rose 1.8 percent to $143.98.
Take-Two Interactive Software is a company that develops interactive software.
(TTWO) increased by 1.1 percent to $173.98.
Blizzard by Activision
The stock rose 0.5 percent to $93.39. On Tuesday, BMO Capital Markets analyst Gerrick Johnson argued for EA in a post-pandemic society. He raised his target price to $168 from $150 and upgraded the stock to Outperform from Market Perform. According to Johnson, the company was the cheapest among those he covered, which included Activision, Take-Two, and mobile publisher.
Zynga
(ZNGA). According to his estimate, EA trades at a discount to its rivals (Activision, Take-Two, and others), fetching 18 times fiscal 2023 per-share profits vs 23 times for the rest of the group. There are three primary components to Johnson’s explanation for EA’s success. First, while many pandemic limitations have been relaxed in the United States, they remain in place in many international markets, particularly Asia. Second, EA’s brands are solid, particularly Apex Legends, which has been growing steadily. Johnson’s team now forecasts full-year bookings of $740 million in fiscal 2022, up 18 percent from a year ago and up from his previous forecast of $620 million. This calendar year, the company’s sports division is also expected to excel.
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Finally, EA has taken major steps to expand its mobile product offering. It paid $2.4 billion for Glu Mobile earlier this year, giving it access to a library of games as well as staff familiar with the mobile business. In June, EA announced that it will buy Playdemic, a mobile game publisher, from WarnerMedia for $1.4 billion in cash. However, not every company’s stock is expected to rise as lockdowns are lifted. On Tuesday, Benchmark analyst Mike Hickey began coverage of the online videogame platform Roblox, giving it a Sell rating and a $75 target price. Hickey lauded the company for providing “investors with a unique and appealing investment opportunity,” noting that the coronavirus outbreak made many more people aware of Roblox and its services. Roblox, on the other hand, benefited significantly from the pandemic, according to Hickey, with bookings up 171 percent in 2020, compared to 39 percent the year before. He is concerned that the epidemic brought in an unusually large number of new players last year, which would have been spread out over several quarters or years if not for the pandemic. He warned that once lockdown limitations loosen in the United States, engagement may wane. Because many Roblox users are children, their parents may limit their spending on the platform as other options become available. Roblox’s current enterprise worth exceeds that of EA and Take-Two combined, according to Hickey’s methodology. He noted that Roblox is currently trading at 18 times its enterprise value, compared to its competitors, which are trading at around five times. Since its direct listing earlier this year, Roblox stock has risen 88 percent from its reference price, while EA shares have remained unchanged. The
The S&P 500 index
During the same time span, sales increased by 17%. Max A. Cherney can be reached at max.cherney@barrons.com./n
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