Pachter: Video Game Stocks Are 'Relatively Recession-Proof'

Wedbush Securities analyst Michael Pachter joined Benzinga’s PreMarket Prep trading show this week to discuss several topics, including the downturn in video game stocks and several other entertainment-related companies under his coverage.

Game Over?

Equities have taken a beating over the past couple of months, and video game stocks are no exception. Since Oct. 1, Take-Two Interactive Software, Inc TTWO is down 28 percent, Electronic Arts Inc. EA is down 36 percent and Activision Blizzard, Inc. ATVI is down 47 percent.

Pachter said the knee-jerk reaction is likely unwarranted.

“There’s no question that video game publishers are relatively recession-proof,” he said. “If we have full employment and a downturn in the economy, it’s going to be more because consumers are scared, and that really doesn’t impact video game purchases.”

Buying Opportunity

Pachter said he is particularly bullish on Activision Blizzard, which has been one of the hardest-hit stocks in recent weeks.

“They’re going to make $2.58 this year. If they miss that, they’re going to make $2.55. Next year, in the worst-case they’re going to make $2.35 or $2.40, and the stock is trading at under a 20 times multiple on kind of a worst-case number with much better growth prospects going forward,” the analyst said.

Activision Blizzard has an impressive lineup of games due out in 2020 and 2021 that should have any long-term investor excited, Pachter said. Traders should expect Activision to be a market leader one the market calms down, he said.

Other Entertainment Stocks

Pachter also has a Buy rating on GameStop Corp. GME and said it offers a potential rebound trade and buyout opportunity.

“They haven’t replaced the CEO since May, and they announced recently they weren’t interviewing anybody because they are in discussions with private equity to sell the company. That tells me they’re closer to selling than investors expect,” he said.

The analyst is still bullish on Roku Inc. ROKU following its recent pullback, but said the company’s yet-unproven platform business has much to prove.

“It’s hard for me to tell you this is my favorite pick because, again, I don’t know that they’re going to succeed. I just believe that what they say is plausible, they’re positioned to succeed, and I expect they will."

Pachter also said he expects strong box office numbers from AMC Entertainment Holdings Inc AMC and a corresponding rebound in the stock.

Related Links:

Activision Blizzard Q3 Takeaways: 'Call Of Duty,' E-Sports And More

Munster: There's Something 'Fundamentally Wrong' With Facebook

Posted In: Michael PachterWedbush SecuritiesAnalyst ColorLong IdeasTop StoriesAnalyst RatingsTechTrading IdeasInterview

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.