- Video game stocks moved higher in recent trading sessions as traders were ready to bet that strong pullbacks were not justified.
- Take-Two Interactive and Electronic Arts are trading at 16 forward P/E.
- Analyst estimates have been moving lower in recent weeks, so traders need to monitor whether this trend will continue.
Several video game stocks have recently gained strong upside momentum as traders rushed to buy them after pullbacks. Despite the recent rebound, these stocks are trading at reasonable valuation levels.
Take-Two Interactive Software
Take-Two Interactive has recently released its fiscal Q4 earnings report. The company reported revenue of $930 million and GAAP earnings of $0.95 per share, beating analyst estimates on both earnings and revenue.
Take-Two Interactive will soon close the acquisition of Zynga, which has previously served as a notable bearish catalyst for Take-Two Interactive stock.
Analyst estimates have been moving lower in recent months. Currently, Take-Two Interactive is expected to report earnings of $4.89 per share in fiscal 2023 and earnings of $7.95 per share in fiscal 2024, so the stock is trading at 16 forward P/E. This is not too cheap, but traders look ready to bet that the worst is behind for Take-Two stock.
Electronic Arts stock has also enjoyed strong support in recent trading sessions. Currently, the stock is trading at 16 forward P/E, in line with Take-Two Interactive.
While video game sales have been declining in recent months, the company’s guidance exceeded analyst expectations. In addition, Electronic Arts increased its quarterly cash dividend from $0.17 to $0.19 per share, which served as a material positive catalyst for the company’s shares.
Importantly, Electronic Arts stock managed to move higher despite the recent sell-off in S&P 500, so demand for the company’s shares is strong. It should be noted that analyst estimates for Electronic Arts have continued to move lower in recent weeks, which may cap stock’s near-term upside.
To keep up with the latest earnings updates, visit our earnings calendar.