In a new analyst note, Wedbush Morgan's Michael Pachter calls Electronic Arts stock a "top pick" in the near term, and also expresses confidence that GameStop will continue to make inroads in the digital space.
In recommending EA's stock, Pachter cites the expectations-shattering success of The Sims Social
, which he projects could bring in $80 to $160 million annually for EA if it maintains its current mark of 11 million daily users.
Pachter also sees strong potential for Battlefield 3
's upcoming release, with an expected 4 million PC sales augmented by anywhere from 4 million to 8 million console sales, depending on the strength of review buzz.
Leading U.S. video game retailer GameStop continues to see increased market share, Pachter said, noting that the retailer's aggressive push into digital sales seems to be working. "Each publisher we cover has commented to us that DLC sales are up, and each has pointed to GameStop as a key driver of DLC sales gains," he writes.
Pachter also noted that GameStop is the exclusive retail partner for Activision's Call of Duty Elite
and EA Sports' Season Ticket packages, suggesting these publishers are no longer overly concerned about GameStop's used sales undercutting their new game business.
Activision's stock could be negatively affected by what Pachter calls "the looming success of EA’s Battlefield 3
and Star Wars MMO
," but he predicts any such effects will be short-lived. Take-Two, meanwhile, is well-situated for strong growth in the next fiscal year thanks to the release of Bioshock Infinite
, Borderlands 2
and an expected Grand Theft Auto
Pachter is maintaining a "neutral" rating on all other video game stocks he tracks, citing "difficult comparisons for Majesco, declining hardware sales for Nintendo, and very high capitalized software balances for Ubisoft and THQ burdening profitability."