Stock Showdown – Take-Two (TTWO) vs Electronic Arts (EA): Jefferies Likes Both, But Which Is Best?

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On June 24, analysts from Jefferies upgraded their ratings the two of the biggest gaming companies in the world, Take-Two Interactive Software, Inc. (NASDAQ:TTWO) and Electronic Arts Inc. (NASDAQ:EA), to ‘Buy’ ratings from ‘hold’. Let take a look at the two companies and see what Jefferies likes about them, and which, if any, is the better investment.


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Comparing Electronic Arts Inc. and Take-Two Interactive may be a bit tricky as the two companies are not exactly a mirror of the other. Electronic Arts has a market cap of $21.29 billion, while Take-Two Interactive is a light weight by comparison with its $2.42 billion cap.  Electronic Arts, based in Redwood City, California and founded in 1982, is the world’s third-largest gaming company by revenue. New York-based Take-Two Interactive, famous for, among other things, its Grand Theft Auto series, was founded in 1993 and incorporates Rockstar Games, 2K Games and 2K Sports.

Take-Two Interactive Software, Inc. (NASDAQ:TTWO), which posted earnings per share for the first quarter of $0.35 has experienced slow growth on the NASDAQ this year, being up by just 1.89% year-to-date, though by a much more robust 31.19% during the last year. With that return, Take-Two Interactive is well below its rival Electronic Arts Inc. (NASDAQ:EA), which has gained an impressive 43.95% so far this year and 86.57% during the last year. The price earnings (P/E) ratios partly explain why; while Electronic Arts has a P/E of 25, Take-Two Interactive has a goose egg, due to the fact that it is posting losses. Analysts do believe that Take-Two Interactive will post earnings of $1.04 per share for 2015 however, implying a P/E of 27.

Let’s take a look at the insider activity and see if it can reveal some major differences between the prospects of the two gaming companies. On June 22, Chief Talent Officer Gabrielle Toledano dumped 8,000 shares of Electronics Arts, representing roughly 6% of her total stake in the company. Some weeks earlier, on the opposite coast, Take-Two Interactive Software, Inc. (NASDAQ:TTWO) General Counsel Daniel Emerson sold 9,150 shares in the company he counsels, leaving him with 53,109 shares. Much more interesting was the insider sales from Take-Two Interactive’s president Karl Slatoff, who on May 27 unloaded 344,666 shares, holding 2.57 million shares or about 2.9% of Take-Two Interactive’s common shares after the sale.

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