巴克莱-美股-互联网行业-美国互联网：游戏的未来是现在-2019.10.21-80页 (2).pdf

Equity Research 21 October 2019 CORE Barclays Capital Inc.and/or one of its affiliates does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 74.Restricted-Internal U.S.Internet The Future Of Gaming Is Now We are transferring co-coverage of four video game companies-ATVI,EA,TTWO,and ZNGA,with a combined market cap of$90 billion to Mario Lu-while our colleague Nick Dempsey initiates coverage of CD Projekt.2019 marks the year cloud gaming will be introduced to the mass market through the launch of Google Stadia in November,while Generation 9 consoles have been announced by both Sony and Microsoft for Holiday 2020.Cloud fulfills consumer demand for ubiquitous gaming across multiple devices,which have been proven by mobile gaming growth outpacing the overall industry,the disruption caused by cross platform titles such as Fortnite,and the popularity of hybrid consoles such as the Nintendo Switch.We estimate cloud gaming services 5B+devices and will provide an incremental$9B in software revenue by 2025,or 20%of the console market.In other words,the future of gaming is now.Key Publisher Takeaways:ATVI:PT goes to$63 from$55.We think current valuation is attractive considering multiple upcoming catalysts:CoD Mobile,Diablo Immortal,Diablo 4,&Overwatch 2.TTWO:PT goes to$142 from$124.We continue to see upside from RCS in the form of Rockstar Online and NBA 2K.We estimate significant roster changes in the NBA will result in more repeat purchases,which could potentially be worth$0.52 in EPS,or a 11%lift to our NTM EPS estimates.EA:We move to EW from OW and PT goes to$99 from$104.Outside the strength of FIFA,we see limited upside compared to its peers and estimate majority of EPS growth in F21 will come in the form of buybacks rather than business fundamentals.ZNGA:PT goes to$6.00 from$6.20.ZNGAs pipeline is strong with 7-plus titles,but we expect it to be equally met with increased competition from cross platform&cloud.UBI:Remain OW.We do not think that UBIs ability to deliver good games is damaged by one disappointing reaction and view the mid-term growth opportunities as intact.CDR:Initiate at EW with a PLN 260 PT;We think Cyberpunk will sell similar to Red Dead Redemption 2(22m in 2020;30m by 2022)but think the upside is mostly priced in.Key Investment Themes:In a crowded field,some companies are much better positioned than others;we would be selective.We highlight eight main themes that we think will impact the video game stocks in the next five years:1)The Next Console Cycle;2)Cloud Gaming;3)What Rising Barriers of Entry Mean For The Industry;4)Dawn of Subscription Services;5)Take Rate Pressure To Persist;6)The Fortnite Effect:Cross Platform&Battle Pass;7)Gaming Becoming The Next Social Media Platform;8)Impact From Eastern Publishers(Tencent&NetEase).INDUSTRY UPDATE U.S.Internet POSITIVE Unchanged U.S.Internet Mario Lu+1 212 526 4885 BCI,US Deepak Mathivanan+1 415 274 5351 BCI,US Gregory Zhao+1 212 526 2268 BCI,US Ross Sandler+1 415 263 4470 BCI,US Thomas Chadwick+1 212 526-3385 BCI,US Jane Han+1 212 526 9317 BCI,US Trevor Young,CFA+1 212 526 3098 BCI,US European Media Nick Dempsey+44(0)20 3134 5888 Barclays,UK Barclays|U.S.Internet 21 October 2019 2 CONTENTS STOCK SELECTION CRITERIA FOR VIDEO GAMES.3 When To Invest In The Video Game Sector.3 Key Investment Themes.13 Key Publisher Takeaways.16 INVESTING IN THE FUTURE OF GAMING.18 Gearing Up For The Next Console Cycle.18 Cloud Expands The Installed Base For Publishers.22 Rising Barriers Of Entry Suggest Less Is More.38 The Dawn Of Subscription Services.43 Take Rate Pressure To Drive Publisher Margins Higher.47 The Fortnite Effect.51 Gaming As The Social Media Platform Of The Future.61 East Meets West.71 Barclays|U.S.Internet 21 October 2019 3 STOCK SELECTION CRITERIA FOR VIDEO GAMES When To Invest In The Video Game Sector Before we dive into the future of gaming,we want to look back and determine when gaming stocks actually outperformed the market.We begin by looking at their performance in the past five years,during which gaming stocks have been up for four out of the five years,with 2015 and 2017 standing out as the years that generated the most alpha.2015 marked the second year into the release of the 8th generation of game consoles(PS4&Xbox One)when the console digital transition started to ramp up.While 2016 was a large outperformance year for TTWO in particular,the rest of the sector lagged the market.ATVI and ZNGA had negative returns due to weak sales of Guitar Hero and Skylanders,causing a rare revenue miss for ATVI in 4Q15,and ZNGA was unable to produce a hit game while it also delayed titles such as Dawn of Titans.In 2017,all five gaming stocks(ATVI,EA,TTWO,UBI,&ZNGA)outperformed the Nasdaq,as digital revenue as a percentage of total was over 50%+for ATVI,EA,TTWO,and ZNGA,an important milestone to reach higher margins.2018 underperformed mostly due to mishaps in title release execution coupled with the rise of Fortnite.2019 has been a rebound year from December 18 lows,similar to broader tech stocks,with ATVI,EA,and TTWO all seeing 20%YTD returns and ZNGA 50%+(vs.the Nasdaq at+23%YTD).FIGURE 1 Performance of Gaming Stocks Over The Last Five Years Source:Refinitiv,Barclays Research.Data as of 10/18/19.Investing By Console Cycles If we extend our horizon back two gaming console cycles to Gen 6,starting right after the dot-com crash to diffuse any macro noise until Sept 2019,the Video Game Index(which we define as an index consisting of ATVI,EA,TTWO,and UBI),has outperformed the Nasdaq in 109 out of the 205 months since then or 53%of the months.If we separate this time period by console cycle,alpha generated from the Video Game Index vs.the Nasdaq is even more apparent as the Gen 6 and Gen 8 era generated positive alpha 55%and 62%of the time respectively,while Gen 7 only produced positive alpha 45%of the time.Share Price Change20152016201720182019 YTDATVI92.1%-6.7%75.4%-26.5%19.4%EA46.2%14.6%33.4%-24.9%22.6%ZNGA0.8%-4.1%55.6%-1.8%58.8%TTWO24.3%41.5%122.7%-6.2%19.2%UBI75.9%26.7%89.8%9.9%-17.7%Mkt Cap Wtd Avg67.0%7.2%68.3%-18.6%20.1%NASDAQ5.7%7.5%28.2%-3.9%22.9%Out(under)perf.61.3%-0.3%40.1%-14.7%-2.8%Barclays|U.S.Internet 21 October 2019 4 FIGURE 2 Gaming Stocks Monthly vs.Nasdaq,2002-Present Source:Refinitiv,Barclays Research.Note:VG Index includes ATVI,EA,TTWO,and UBI.Furthermore,we analyse the same periods above but for the total returns rather than segmenting it by monthly alpha.During the Gen 6 era,alpha generated by the Video Game Index compared to the Nasdaq was+65%,driven by large gains from ATVI and UBI,aided by a large acceleration in software sales in 2006.However,the alpha was-102%from 2007-2013 during Gen 7,driven by large underperformance from EA and UBI as they were unable to effectively manage the transition to mobile,giving all the outperformance back.The release of PS4 and Xbox One,along with digital revenues going from 26%of console revenue to 55%in 2019,caused the significant outperformance thus far during Gen 8.FIGURE 3 Gaming Stocks Total Return vs.Nasdaq By Gaming Console Cycle Source:Refinitiv,Barclays Research.Note:VG Index includes ATVI,EA,TTWO,and UBI.If we were to analyse the sector as a whole since September 2002,the Video Game Index has outperformed the Nasdaq by 8x since then a clear illustration of why the sector should be on investors radar,in our view.-40%-30%-20%-10%0%10%20%30%Oct-02Oct-03Oct-04Oct-05Oct-06Oct-07Oct-08Oct-09Oct-10Oct-11Oct-12Oct-13Oct-14Oct-15Oct-16Oct-17Oct-18VG Index-NasdaqGen 6Gen 7Gen 8Positive Months:55%Negative Months:45%Positive Months:45%Negative Months:55%Positive Months:62%Negative Months:38%-200-1000100200300400500600Sep-02Sep-03Sep-04Sep-05Sep-06Sep-07Sep-08Sep-09Sep-10Sep-11Sep-12Sep-13Sep-14Sep-15Sep-16Sep-17Sep-18Sep-19%VG Index-NasdaqGen 6Gen 7Gen 8Barclays|U.S.Internet 21 October 2019 5 FIGURE 4 Video Game Index vs.Nasdaq,Sept 2002-Present Source:Refinitiv,Barclays Research.Note:VG Index includes ATVI,EA,TTWO,and UBI.Where Valuations Are Currently While the aggregate performance of the video game stocks relative to the market has levelled out over the past two console cycles,the groups multiple has expanded significantly since the start of the current console cycle in late 2013 and the re-rating in the sector went from roughly 10-20 x in the last cycle to 20-26x cycle-to-date.We believe this is warranted given the positive effect the transition to the Digital Era has had on the industry.On a forward P/E basis,the group is currently trading at 21x 2020E EPS compared to 14x forward EPS at the same point prior to the launch of new consoles in 2013.This is above the large-cap Internet group at 19x(Figure 5).This premium valuation vs.large-cap Internet is warranted in our view due to several reasons:More consistent,more diverse,and more recurring revenue base;Digital mix going from 60%to 80%+will continue to drive record profits and FCF;Higher revenue per player and unit economics will accelerate margin expansion;Current console base at 150mn+with overall game sales stable including digital;Mobile still under-penetrated and recent acquisitions improve execution potential;Cloud gaming to further expand the TAM for console publishers;China remains a large opportunity that is increasingly seeing more traction.The biggest topic of debate for video game stocks could be where multiples go from here and the attractiveness of the sector relative to others with similar fundamentals,higher margins,or more attractive growth.-20002004006008001,0001,2001,4001,600Sep-02Sep-03Sep-04Sep-05Sep-06Sep-07Sep-08Sep-09Sep-10Sep-11Sep-12Sep-13Sep-14Sep-15Sep-16Sep-17Sep-18Sep-19%VG Index-NasdaqGen 6Gen 7Gen 8Barclays|U.S.Internet 21 October 2019 6 FIGURE 5 Historical P/E trading Range By Industry,2014-Present Source:Thomson Reuters,Barclays Research The Video Game Index(ATVI,EA,TTWO,&UBI)is currently trading in the middle of its current console generation valuation range but above its peak in the prior console cycle.The largest tailwind in our view,is the potential upside from cloud gaming,which is likely not embedded in Street numbers.Although the video game group shares margin and secular benefits of the large-cap internet group,we believe it deserves a premium multiple because of:1)the new wave of potential digital gamers brought on by cloud gaming;2)gross margins to increase due to the continued mix shift to digital,bolstered by lower take rates from platform providers;and 3)in-game spend still has a long runway for growth,with consumer behaviour trends benefitting the large video game publishers.The figures below show the 2-Year forward P/E and expected 2-Year average EPS growth for relevant sectors.21x18x11x23x19x0 x5x10 x15x20 x25x30 xWesternInteractive MediaAsian InteractiveMediaTraditional MediaSoftware andServicesInternet2Y Fwd P/E RangeCurrent 2Y Fwd P/EBarclays|U.S.Internet 21 October 2019 7 FIGURE 6 Video Game Index FIGURE 7 Large-Cap Internet Source:Refinitiv,Barclays Research.Note:Video Game Index includes ATVI,EA,TTWO,&UBI.Source:Refinitiv,Barclays Research.Note:Large-Cap Internet includes FB,GOOGL,AMZN,EBAY,PCLN,&EXPE.FIGURE 8 Traditional Media FIGURE 9 Large Cap Software Source:Refinitiv,Barclays Research.Note:Traditional Media includes CMCSA,DIS,TWX,&VIA.Source:Refinitiv,Barclays Research.Note:Large Cap Software includes ADSK,CTXS,INTU,MSFT,ORCL,CRM,SAP,SYMC,VMW,ADBE.As the console cycle shifts to Gen 9 next year,we would expect moderating revenue and EPS growth to drive slight multiple compression across the sector,but the continued mix shift to digital(aided by cloud)and the ability to continually monetize growing engagement within video games is a compelling proposition that should accelerate EPS growth,which we think would enable the group to elevate its current valuation.Given the puts and takes,we are positive on sector valuation relative to other opportunities in our broader large cap tech universe.Significant changes in the way players engage with and consume content through cloud gaming,as well as the way publishers deliver,monetize,and profit from gaming content over the next 5-10 years should guide multiple expansion higher in the medium-term.Gaming Stocks Are Trading Below Relative Historical Multiples Gaming Stocks are currently trading 15%below their 5-Yr FY2 P/E multiple average relative to the Nasdaq.Most individual company multiples have since recovered from their recent lows in 2018,but remain relatively cheap compared to the broader market.0%5%10%15%20%25%30%35%40%45%0 x5x10 x15x20 x25x30 x35xFY2PEAdj.EPS Growth0%5%10%15%20%25%30%0 x5x10 x15x20 x25x30 xFY2PEAdj.EPS Growth0%4%8%12%16%20%0 x2x4x6x8x10 x12x14x16x18x20 xFY2PEAdj.EPS Growth0%4%8%12%16%20%0 x5x10 x15x20 x25x30 xFY2PEAdj.EPS GrowthPositive on sector valuation relative to other opportunities in our broader tech universe Barclays|U.S.Internet 21 October 2019 8 FIGURE 10 FY2 P/E Multiples FIGURE 11 VG Index FY2 P/E Currently Trading 11%Below Historical Average Source:Refinitiv,Barclays Research Source:Refinitiv,Barclays Research As mentioned above,2018 was a large downward re-rating for the video game stocks as titles such as Fortnite disrupted the industry combined with title execution mishaps.Micro-transactions are one of the most profitable revenue streams for any publisher and the acceleration in margin expansion and we believe earnings growth from a shift in revenue from game sales to in-game micro-transaction is not fully reflected at current levels.The gap between console and PC digital download penetration at 100%will continue to converge,resulting in continued exceptional growth in high-margin digital revenue as more sales shift from physical to digital.We believe the video game industry is somewhat insulated to regulations surrounding broader tech and should trade in line or at a higher multiple due to the secular tailwinds with regards to the digital transition that is only halfway done and the large opportunity ahead with cloud gaming.FIGURE 12 ATVI FY2 Adj.P/E,2015-Present FIGURE 13 EA FY2 Adj.P/E,2015-Present Source:Refinitiv,Barclays Research Source:Refinitiv,Barclays Research Both ATVI and EA were trading below their 5-year multiple average entering 2019.ATVI experienced a steep downward re-rating in Oct 2018 from 27x to 23x,followed by a disappointing Blizzcon the month after that did not have meaningful announcements to 1012141618202224262830Jan-15May-15Sep-15Jan-16May-16Sep-16Jan-17May-17Sep-17Jan-18May-18Sep-18Jan-