4 Stocks to Track in a Thriving Video Gaming Industry
High demand for videogames during the pandemic has been boosting sales of consoles and games from MSFT, SONY, ATVI and EA.
The vaccination drive is in full swing and people have started stepping out of their homes with a lot of confidence. They are optimistic that some of the coronavirus-battered industries will finally bounce back as the economy further reopens.
This is also being seen as a threat to certain industries like videogames, which was one of the biggest beneficiaries of the pandemic, with sales skyrocketing as millions stayed home. However, that may not be the case given that videogame sales continue to soar.
Videogame Sales Soar
After a successful first half of 2021, videogame sales have continued to rise. According to the latest report from The NPD Group, consumers spent a whopping $4.6 billion on gaming in July, jumping 10% on a year-over-year basis.
This was marked the best July since 2008 in terms of sales. July’s jump comes despite many predicting that sales will decline as the economy reopens, with people beginning to opt for outdoor entertainment and planning holidays.
Hardware sales saw maximum growth, jumping 98% on a year-over-year basis to $323 million. Sony Corporation’s SONY PlayStation 5 was the best-selling console. In software, Nintendo Co., Ltd.’s NTDOY The Legend of Zelda: Skyward Sword registered the highest sales figure, while Activision Blizzard, Inc.’s ATVI Call of Duty: Black Ops Cold War was the second-best-selling game in July.
Videogame Market Going Strong
A number of Americans have finally started planning holidays and footfall at outdoor entertainment joints is on the rise. However, that hasn’t hampered the popularity and sales of videogames, with the number of gamers increasing in the United States.
The videogames market looks promising as of now with sales having grown both in the first and second quarters. Also, spending on gaming has grown every month since the COVID-19 outbreak, except for a surprise decline in April.
According to NPD Group’s Q2 2021 Games Market Dynamics: U.S., consumer spending on videogames in second-quarter 2021 increased 2% year over year to reach $14 billion. Spending on mobile games also jumped 5% on a year-over-year basis in the second quarter, according to data from Sensor Towers.
Moreover, new players are foraying into the videogames market, while existing players are pumping in billions of dollars to develop new games. Last month, Netflix, Inc. NFLX announced that it would be foraying into the gaming market. This will only intensify competition over the coming days as the streaming giant will be providing ad-free videogame services for mobile devices to its existing customers for free.
Stocks to Watch
Fears of the Delta variant of COVID-19 have been on the rise over the past month, with new cases being reported daily despite millions being vaccinated now. It won’t come as a surprise if people once again postpone their travel plans and stay confined to their homes. So, videogame sales are unlikely to slow down anytime soon. This thus makes an opportune time to invest in gaming stocks that are sure to benefit in the near term.
Microsoft Corporation MSFT is one of the leading videogame makers and manufacturers of hardware and accessories. The company acquired videogame maker ZeniMax Media in December 2020 for $7.5 billion and rolled out its most successful Xbox Cloud Gaming service to iPhones, iPads and PCs in April. It will launch Microsoft Flight Simulator on Xbox Series X and Xbox Series S a year after its PC debut.
The company’s expected earnings growth rate for the current year is 8%. The Zacks Consensus Estimate for current-year earnings improved 3% over the past 60 days. Microsoft carries a Zacks Rank #2 (Buy).
Sony Corporation designs, manufactures and sells several consumer and industrial electronic equipment. The company’s product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers and computer peripherals, and telecommunication equipment. Following the success of its PlayStation 5, the company is more focused on product improvement. Given the huge size of PS5, Sony recently launched a lighter version called Digital Edition, which has been a hit with gamers.
The company’s expected earnings growth rate for next year is 19.4%. Its shares have gained 2.8% in the past 30 days. Sony has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Electronic Arts Inc. EA is a leading developer, marketer, publisher and distributor of interactive games (video game software and content). It distributes gaming content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through its online portals. Last month, the company announced that it will buy mobile studio Playdemic from Walt Disney Company’s DIS Warner Media for $1.4 billion in an all-cash deal. The videogame maker also will soon release the remake of horror classic Dead Spacefor PlayStation 5, Xbox Series X|S and PC.
The company’s expected earnings growth rate for the current year is 15.3%. The Zacks Consensus Estimate for current-year earnings improved 3.4% over the past 60 days. Electronic Arts has a Zacks Rank #3.
Activision Blizzard, Inc. is a leading developer and publisher of console, online and mobile games. The company’s Call of Duty is one of the most popular gaming franchises globally. Its Overwatch League can be considered a pioneer of the e-sports concept.
The company’s expected earnings growth rate for the current year is 10.1%. The Zacks Consensus Estimate for current-year earnings improved 1.1% over the past 60 days. Activision Blizzard carries a Zacks Rank #3.
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Microsoft Corporation (MSFT): Free Stock Analysis Report
Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
Netflix, Inc. (NFLX): Free Stock Analysis Report
The Walt Disney Company (DIS): Free Stock Analysis Report
Electronic Arts Inc. (EA): Free Stock Analysis Report
Nintendo Co. (NTDOY): Free Stock Analysis Report
Sony Corporation (SONY): Free Stock Analysis Report
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