Goldman Launches Coverage of Video Games: Buy Ratings on ERTS, ATVI; Neutral on THQI

Goldman Sachs analyst Mark Wienkes Tuesday picked up coverage of the video game sector with an Attractive view, setting Buy ratings on Electronic Arts (ERTS) and Activision (ATVI) and a Neutral rating on THQ (THQI).

“Our thesis is that this console cycle likely matters more than any other, past or future, given broadening game play, geographies, demographics and devices, and our view that these, combined with online connectivity, will unlock new levels of growth and render subsequent cycles less important,” he wrote Tuesday morning.

Wienkes writes that he sees a console cycle that will be of “greater length, depth and breadth leading to higher margins and returns.”

The analyst writes that his bullish views of ATBI and ERTS are based on positive estimate revisions and “a near tripling of ROIC [return on invested capital] over our 2008-2011 forecast period contrasted against overly conservative expectations.” The neutral rating on THQI, he says, is due to “a more protracted benefit from this cycle.”

ERTS vs. THQI vs. ATVI 1-yr chart: