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Video game stocks could be seen as "safe havens" for investors, which suggests the bearish case for Take-Two Interactive Software, Inc (NASDAQ:TTWO)'s stock can no longer be justified, according to BMO Capital Markets.
The Analyst
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BMO's Gerrick Johnson upgraded Take-Two from Underperform to Market Perform with a price target lifted from $95 to $110.
The Thesis
The video game sector is "quite defensive" against economic downturns as it represents one of the cheapest forms of entertainment when considering cost divided by the time consumed, Johnson wrote in a note. In addition, video games could emerge unscathed from trade wars as the sector is mostly immune from import tariffs as a digital code is not taxed at borders.
These factors bode well for Take-Two, which boasts a "robust" pipeline of video games, including "Borderlands 3" and the "Outer Worlds" in fiscal 2020 followed by a potential "BioShock" the following year along with an eventual new "Grand Theft Auto" game.
Johnson said the video game industry could become a bigger target for acquisitions by larger media, tech or entertainment companies. A potential acquirer is likely interested in buying exclusive video game content along with a portfolio of intellectual properties they can monetize.
Price Action
Shares of Take-Two were trading higher by 2.3 percent to $108.44 at time of publication.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.