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Game Stocks Finding Favor With Wall Street as Tech Shares Dive

20 Jul, 2001 By: David Ward

Thanks largely to plunging fortunes of dot-coms and other technology companies, Wall Street has flocked to the console game industry, sending the stock prices of publicly held game companies soaring.

During the first six months of 2001 alone, THQ's stock price is up more than 130%. Take Two Interactive is up 60%. Activision is up more than 90%. And Electronic Arts is up 65%. Even thebeleaguered Acclaim Entertainment has staged a furious comeback, risingfrom a low of 31 cents per share in January to $4.37 this month.

Heath Terry, v.p. with Credit Suisse First Boston’s Technology Group, says unlike many tech-related industries, the console business can offerinvestors highly sought-after visibility going forward, pointing to strong sales of Sony PlayStation 2 and Game Boy Advance as well as theholiday release of Microsoft Xbox and Nintendo GameCube. Because of that, “there’s a lot of dedicated technology money out there that’slooking at this industry,” Terry says.

Take Two Interactive president Paul Eibler also credited Microsoft’s imminent arrival in the market with causing many investors to stoplooking at video games as merely toys, saying, “Microsoft… has giventhe industry a lot of credibility.”

The added money can help fund additional acquisitions, furthering game industry consolidation. It can also mean more financial resources for product development, marketing and retail support.

But it also means those companies are increasingly under the analyst microscope where, Eibler added, they must produce solid quarter-after-quarter improvement to maintain their stock momentum.

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