Every new console generation has driven more growth for the leading game makers. Since the Xbox One and PlayStation 4 launched in 2013, shares of Activision Blizzard (NASDAQ:ATVI) and Take-Two Interactive (NASDAQ:TTWO) have gained 341% and 916%, respectively. The recent launch of Sony's PlayStation 5 and Microsoft's Xbox Series X could bring a fresh wave of demand for some of the most popular franchises, such as Activision's Call of Duty and Take-Two's Grand Theft Auto.

Let's compare the video game specialists to determine which stock is best positioned to outperform from here.

Activision Blizzard has found a winning formula with Call of Duty

In February 2019, management announced it was cutting back in some areas to double down on its biggest franchises and over the last year, Activision has seen a resurgence in its Call of Duty franchise, which has been the best-selling console title over the last decade. The Call of Duty franchise now has more than 100 million players, which is more than double what it had before the release of Call of Duty: Mobile a year ago. 

A hand holding a video game controller.

Image source: Getty Images.

Activision will be looking to keep players engaged with the recently launched Call of Duty: Black Ops Cold War, which features improvements and content integration with last year's Call of Duty: Modern Warfare

Overall, Activision has six key franchises that serve as platforms to deliver new experiences to the company's 390 million monthly active users. Three of those franchises -- Call of Duty, World of Warcraft, and the mobile game Candy Crush -- generate over $1 billion in annual net bookings. Management is planning to further monetize its players by expanding dedicated console and PC franchises to mobile, in addition to offering new free-to-play experiences. 

The company's current 2020 outlook calls for bookings and adjusted earnings per share to increase by 27% and 33%, respectively, over 2019. Keep in mind that growth may moderate once the pandemic has passed, but Activision Blizzard has a long history of delivering market-beating returns to investors.

The consensus analyst estimate has the company growing bookings and adjusted EPS at low-single-digit rates in 2021, but that forecast could prove conservative once Overwatch 2 and Diablo 4 are released. The stock trades at 21 times 2021 earnings estimates, which is lower than Take-Two's forward P/E of 31. At first glance that would seem to make it the better buy between these two, but I don't think that's the case.  

ATVI Chart

ATVI data by YCharts.

Take-Two is assembling a stellar roster of titles

Take-Two stock has clobbered its larger peer over the last five years, delivering a stellar return of 388%. There are plenty of reasons to believe Take-Two can continue that streak of outperformance.

With just over $3 billion in annual bookings, Take-Two is smaller than Activision and doesn't have the scale across so many top franchises, but what it does have packs a punch.

Take-Two has three workhorses that drive the bulk of its operating results. Grand Theft Auto V and Red Dead Redemption 2 have sold a combined 169 million copies, which is an incredible feat given that GTA V is 7 years old. 

Along with those titles, NBA 2K21 launched in September. The latest version of the highly rated basketball franchise is already off to a great start, with over 5 million copies sold. 

Across its various publishing labels, including 2K (Borderlands and NBA 2K), Rockstar (GTA V), Private Division (The Outer Worlds), and Social Point's mobile games (Monster Legends and Dragon City), Take-Two is gradually building a lucrative gaming empire.

Earlier this year, the company signed a new multiyear agreement to make a series of games in partnership with the NFL. The first of these will release in 2021. 

Take-Two also has big plans in mobile. The game maker acquired Social Point for $250 million in 2017, and it currently serves as the company's mobile development arm. Social Point has more than 10 new games planned for launch in the coming years. 

What's more, the growth of Take-Two's biggest franchises has filled its cash coffers, and management is putting that money to work to drive future returns for investors. On Nov. 10, Take-Two announced the acquisition of Codemasters in a deal valued at $994 million. The U.K.-based studio brings top racing franchises, including Dirt and Project Cars, into the company's portfolio. 

ATVI Revenue (TTM) Chart

ATVI Revenue (TTM) data by YCharts.

Which is the better buy?

Title by title, Take-Two is building a powerhouse in the video game industry, and it's growing off a smaller base of revenue than Activision, which is why I would favor buying shares of Take-Two right now, even though it trades at a higher valuation based on forward earnings estimates.

Take-Two has already outperformed significantly, as evidenced by its record of growing revenue and profits much faster than Activision Blizzard in recent years. Its deep pipeline of new titles should deliver the results that will fuel the stock price to new highs over time. 

Companies with better growth prospects are typically going to trade at higher P/E multiples. I personally own shares of both stocks, but I wouldn't be afraid to buy Take-Two at these levels. The maker of Grand Theft Auto gets my vote for the better buy.