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3 Stocks to Make the Most of Continued Demand for Video Games

The popularity of video games in the United States continues unabated and is set to grow further, making it wise to invest in names like Mattel (MAT),...

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This story originally appeared on Zacks

When coronavirus gripped the United States last year, people resorted to various at-home forms of entertainment. This is when gaming took center stage as people found it to be an engaging way of spending time.

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While video games have been traditionally available across personal computers (“PCs”) and gaming consoles, other platforms like mobile are also allowing casual gamers to come into the fold. In fact, mobile games are quickly catching up with traditional games in terms of performance and graphics. The emergence of cloud gaming is also providing a boost to the video gaming industry as people can play graphic-intensive titles with the help of a stable Internet connection.

Even in 2021, the popularity of video games is continuing unabated in the United States, highlighting that it is emerging as a major form of entertainment. Per the Q2 2021 Games Market Dynamics: U.S. report from The NPD Group, U.S. consumer spending on video games during the second quarter of 2021 increased 2% year over year. The report stated, citing data from Sensor Tower, that U.S. consumer spending on mobile games during the second quarter of 2021 also increased 5% year over year.

In fact, video game sales continued to soar in July as well. The NPD Group reported that U.S. consumers spent $4.6 billion on video games, up 10% year over year, as mentioned in a gamesindustry.biz article. The article further stated, citing the NPD Group that spending on video game content increased 6% year over year in July across “console, mobile, PC, cloud, and subscription services” while spending on gaming hardware also rose 98% year over year.

The huge popularity of video games across the country seems set to continue. Per a report by SafeBettingSites, U.S. video gaming industry revenues are expected to increase 11.2% in 2021 and reach $30.37 billion. What’s more, the number of video gamers across the country is also set to receive a boost as a separate report by SafeBettingSites stated that the penetration rate in the U.S. gaming market is set to reach 50% in 2022 and 54% by 2025. The report also stated that U.S. video game revenues are expected to reach $42.5 billion by 2025.

3 Stocks to Invest in Now

The popularity of video games in the United States is expected to grow further as players find it to be an engaging way of spending time. The availability of video games across several platforms should also provide a boost to the industry with more users set to come into the fold. This seems then a good time to invest in stocks that stand to benefit from the continued demand for video games. We have handpicked three such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mattel, Inc. MAT offers mobile games like Hot Wheels id. The company also entered into a joint venture with NetEase that formed Mattel163, which has launched mobile games based on Mattel toys and properties, like UNO. Besides that, Mattel along with Milestone, announced on Feb 25, the upcoming release of Hot Wheels Unleashed. It is an arcade-style racing game to be launched on Sep 30 for major platforms like PCs and consoles.

Shares of Mattel have risen 22.4% year to date and the company currently flaunts a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 16.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 94.4%.

Microsoft Corporation MSFT offers a free-to-play mobile spin-off of its popular Forza racing franchise, namely, Forza Street. Notably, the company is set to launch the next installment of its Forza series on Nov 5, namely Forza Horizon 5, across PCs and Xbox consoles. In fact, in fiscal fourth quarter 2021, gaming revenues increased 11% year over year with revenues from Xbox hardware rising 172%, driven by the new line of consoles.

Shares of Zacks Rank #2 Microsoft have risen 35.7% year to date. The Zacks Consensus Estimate for its current-year earnings increased 3.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 8%.

NVIDIA Corporation NVDA is a leader in offering graphics processing units (“GPUs”) for playing video games. In fiscal second-quarter 2022, the company’s Graphics segment, which includes GeForce GPUs for gaming and PCs, surged 87% year over year. The segment accounted for 60% of the company's total revenues. On Jan 12, the company introduced the GeForce RTX 3060 GPU, which is based on the NVIDIA Ampere Architecture and delivers up to ten times the ray-tracing performance of GTX 1060, providing an upgrade to the overall video gaming experience.

Shares of NVIDIA have risen 71.5% year to date. The Zacks Consensus Estimate for its current-year earnings increased 5.5% over the past 60 days. This Zacks Rank #2 company’s expected earnings growth rate for the current year is 68%.



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Microsoft Corporation (MSFT): Free Stock Analysis Report

 

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