This is shaping up to be the worst day in roughly a decade for EA and TTWO
Video game stocks are getting trounced this morning, after two industry giants faltered in the earnings confessional. First, there's Take-Two Interactive Software, Inc. (NASDAQ: TTWO), down 13.4% to trade at $92.93 after reporting weaker-than-expected fiscal third-quarter earnings, even as revenue topped expectations. The company also hiked its full-year revenue forecast, bolstered by sales of its "Red Dead Redemption 2" title, but the guidance fell short of analysts' estimates.
On the charts, Take-Two stock has now gapped below support at the $100 level, an area that has cushioned pullbacks since November. The drop today has the equity on track for its worst single-day session since December 2009, and earlier pushed TTWO to a new 52-week low of $92.48.
A potential flurry of bear notes could keep the pressure on the shares. That's because 15 out of 17 brokerages in coverage rate Take-Two stock a "buy" or better, with zero "sells" on the books. Further, TTWO's consensus 12-month price target of $136.24 was already a 27% premium to last night's close of $107.29.
Then there's Electronic Arts Inc. (NASDAQ:EA), down 14.4% to trade at $79.22, after the video game maker reported fiscal third-quarter revenue that fell below forecasts. Subpar sales for the company's "Battlefield V" game were a factor, while EA also slashed its revenue forecast for 2019, citing heavy competition from the likes of "Fortnite."
Electronic Arts stock is on track for its biggest daily drop since October 2008, and is hovering around its year-to-date breakeven point of $78.91. Today's brutal bear gap ends EA's recent attempt to break out above resistance at its 80-day moving average.
EA could also face a bearish shift in analyst sentiment. Of the 22 brokerages covering the security, 14 rate it a "buy" or better, with not a single "sell" to be found. In fact, the stock has already been hit with nine price-target cuts this morning, with Cowen's downward revision to $71 from $93 representing the lowest of the newly trimmed forecasts.