Piper Jaffray Teen Survey Spots Five Huge Video Gaming Stock Winners

Apps & Software

Published: April 10, 2014 8:55 am

Last Updated: April 10, 2014 9:02 am

Years ago, Peter Lynch was the chief equity strategist at Fidelity when it ruled the investment landscape. One of his tried and true focus groups was his own family, especially his teenage kids. In a new Piper Jaffray report, the analysts have done essentially the same thing on a much larger scale. In a national study and survey, 7,500 students discussed video game habits, purchase intent for next generation consoles and whether they buy pre-owned games. The survey results showed that male teens continue to spend a healthy 10% of their wallet on video games, consistent with levels during the past two years.

The data was crunched from the large focus group, and here are the top gaming stocks to buy now from Piper Jaffray. All stocks are rated Overweight.

Activision Blizzard Inc. (NASDAQ: ATVI) — with many of the teens surveyed saying they were buyers of next generation consoles, the hit games are sure to follow, and Activision has them, especially its huge hit Call of Duty. The Call of Duty series was launched in 2003. The franchise’s latest release, Call of Duty: Ghosts, launched in Nov. 2013 and turned out to be the best-selling game on the PS4 and Xbox One consoles in the fourth quarter of 2013. Investors are paid a 1% dividend. The Piper Jaffray target price for the stock is $22. The Thomson/First Call consensus target is $23.09. The stock closed Wednesday at $19.84.

Electronic Arts Inc. (NASDAQ: EA) is another leading game developer that should benefit from the continuing rise in console sales. The company produces top-selling games and related content and services under the EA brand in various categories, including action-adventure, role playing, racing and first-person shooter games. The company is also well known for its EA sports games like Madden Football. The company has many of its top titles adapted for mobile play, which is big with the teen demographic. The Piper Jaffray price target is $32, and the consensus is at $30.72. EA closed Wednesday at $28.16.

Glu Mobile Inc. (NASDAQ: GLUU) is a top mobile gaming stock to buy at Piper Jaffray. The company is now reaping the success of the moves that it made in its past product cycle to monetize its games in a better and more efficient manner. Its strategy of focusing on leveraging platform strength and creating long-term gaming franchises has proved profitable. The company recently announced a new James Bond game, and its popular Deer Hunter franchise has been huge. Piper Jaffray’s price target is $6, and the consensus target is $5.80. The stock closed Wednesday at $4.40.

GameStop Corp. (NYSE: GME) sells new and pre-owned video game hardware, physical and digital video game software, pre-owned video game products, personal computer (PC) entertainment and other software in various genres. While hardware sales like new consoles are nice, the company relies on much higher margin new software sales and consoles have just one-quarter of the profitability it registered in its lucrative used video-game division. Of gamers who trade-in their games, an impressive 57% choose GameStop. Investors are paid a solid 3.1% dividend. The Piper Jaffray price target is $52, and the consensus target is $49.84. GameStop closed Wednesday at $43.18.

Take-Two Interactive Software Inc. (NASDAQ: TTWO) offers its products under labels including Rockstar Games and 2K. It develops and publishes action/adventure products under the Grand Theft Auto brand, as well as other franchises, including L.A. Noire, Max Payne, Midnight Club and Red Dead under the Rockstar Games label. The Grand Theft Auto franchise has been one of the best-selling video games ever released. The Piper Jaffray price target is $22, and the consensus figure is at $22.57. The stock closed trading on Wednesday at $20.35.

After a two-year lull, the release of the XBox one and the PlayStation 4 new gaming consoles has totally reignited this sector. Pent-up demand and new, hot title releases are fueling solid sales. The Piper Jaffray survey spotlighted how much the teen consumer can put in to this sector. It also spotlights how much they will continue to generate growth.

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