In this article we will take a look at some of the best video game stocks to buy. You can skip our detailed analysis of the video game industry and go directly to 6 best video game stocks to invest in now.
The video game industry has significantly grown during the pandemic, which explains the great record sales achieved in the second and third quarter of 2020 as everyone resorted to playing games while staying at home.
Video games sales rose by 30% in the second quarter of 2020, thereby hitting the $11.6 billion mark (based on NPD Group) inclusive of a 57% surge in console sales which explains the thriving videogame stocks in 2020.
Some notable gaming companies like Electronic Arts Inc. (NASDAQ: EA), Activision Blizzard, Inc. (NASDAQ: ATVI) and Take-Two Interactive Software (NASDAQ:TTWO) are receiving a lot of attention from the Wall Street as data continue to suggest that gaming has an extremely bright future in terms of profits.
Growth Catalysts for Gaming Stocks
Jefferies analyst Andrew Uerkwitz recently said in a note that video games are becoming extremely popular and he doesn’t see that “changing any time soon.” He expects the industry to continue to grow at double digits for the next 5 years. The analyst named some popular gaming stocks in his note, including Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA) and Take-Two Interactive Software (NASDAQ:TTWO).
Jefferies increased its price target for Electronic Arts (NASDAQ:EA) to $165 price target. The analyst believes that the Street has been underappreciated EA’s assets and growth catalysts. He expects Electronic Arts (EA) to gain from its upcoming launch of Battlefield later this year, followed by big titles like Mass Effect, Dragon Age, Apex Legends, The Sims and Skate.
Uerkwitz is also bullish on Activision Blizzard (ATVI) and maintained a Buy rating for the stock with a $120 price target. The analyst think Activision Blizzard (ATVI) is one of the best gaming companies which is expected to see “step function increases” on the back of its ecosystem of products and services. Some of the titles of Activision Blizzard (ATVI) the analyst is bullish on include Diablo IV and Overwatch 2.
In May 2020, a survey done by NPD Group shows a rise from 15% (2018) to 244 million Americans who play video games (14 hours weekly from 12 hours in 2018). The playtime for video games has risen by 29% during the pandemic. Michael Wolf, co-founder and chief executive consulting firm Activate Inc., predicts that the gaming industry will hit $198 billion mark by 2024 exclusive of sales from hardware and devices, virtual and augmented reality advertising.
China’s gaming industry has significantly developed over the years, with almost 665 million players spending over 278 billion (yuan) as of 2020 on video games. Mobile games are leading on the rank with over 75% of the 2020 market (gaming revenue) share with the client games coming second (20%). The rest of the games, including home console together with browser-based, recorded 5%. Based on the genres, games associated with playing roles took the lead as card games seemed to rise significantly.
Game developers include tech giants reaping big from this trend, with companies like Amazon.com, Inc. (NASDAQ: AMZN) and Facebook, Inc. (NASDAQ: FB) increasing investment in videogame streaming and cloud gaming. For instance, Microsoft Corporation (NASDAQ: MSFT) acquired the company behind the popular Doom game franchise for $7.5 billion.
While Amazon.com, Inc. (NASDAQ: AMZN) has also invested millions into its gaming division, it’s hitherto unable to capture any sizable market share. The company recently canceled its online role-playing game “Lord of the Rings.”
Many sectors were hit by the coronavirus crisis, but video game industry is gained from this situation, unlike the financial markets and hedge fund industry. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Photo by Erik Mclean on Unsplash
With this context and industry outlook in mind, let’s start our list of the 12 best video game stocks to invest in now.
Best Video Game Stocks to Invest in Now
12. Enthusiast Gaming Holdings Inc. (NASDAQ: EGLX)
Enthusiast Gaming Holdings Inc. (NASDAQ: EGLX) is North America’s largest gaming media platform with more than 300 million monthly video game and eSports fans globally. The company recently announced a partnership with ExitLag that will see ExitLag utilize Enthusiast Gaming’s extensive penetration in the North American video gaming and esports market to make its debut in the U.S market. ExitLag hopes to launch its proprietary technology in the U.S as it seeks to attract gamers with improved routing connections.
In its Q4 2020 financial highlights, Enthusiast Gaming Holdings reported $42.5 million, representing a 34% growth compared to what was reported in Q3 2020. In Q4 2020, the company’s direct sales grew by 230% to $3.3 million compared to Q3 2020, while revenue per viewer increased by 100% to $0.52 during the same period. In a span of one year, the company reported a 60% growth in paid subscribers, closing the year at 122,000, while total views from written and video content totaled 9.9 billion in the Q4 2020, thus making it to the list of our 12 best video game stocks to invest in now.
Enthusiast Gaming Holdings Inc. also announced a partnership with short-video platform TikTok that will see the social media platform leverage Enthusiast Gaming’s vast platform of video game and esports fan communities to increase adoption and reduce its gap with the gaming industry.
11. NeoGames S.A. (NASDAQ: NGMS)
NeoGames S.A. (NASDAQ: NGMS) is a global leader of iLottery solutions and services and a technology-driven innovator for national and state-regulated lotteries. The company reported GAAP EPS of $0.10 in Q1 2020, and revenue grew by more than 56.4% to $14.01 million. NeoGames IPO price was $17.00/share. Today, it hovers around $49.
The gaming company stands tall in our list of 12 best video game stocks to invest in now, as it received positive rating from analysts, with Macquarie giving the company an “Outperform” rating and a price target of $28. According to the firm’s analyst Chad Beynon and his team, NeoGames S.A. is expected to grow by 24% by 2030.
10. Glu Mobile Inc. (NASDAQ: GLUU)
Glu Mobile Inc. (NASDAQ: GLUU) is a U.S company that specializes in the development and publishing of video games for mobile phones and tablet computers. The company’s products are designed for various platforms like Amazon, Google Chrome, phones, Windows, Android, and Java ME-based devices.
In its Q4 earnings results, the company reported a 9.8% increase in revenue to $123.98 million.
Electronic Arts Inc. (NASDAQ: EA) recently completed its $2.1 billion acquisition of the company.
9. Skillz Inc. (NYSE: SKLZ)
Skillz Inc. (NYSE: SKLZ) is a global mobile game company that connects players in a fun, fair, and meaningful competition. In Q1 2021, the company reported a revenue of $80 million. The stock ranks 9th in our list of best video game stocks to invest in now.
Cathie Wood’s ARK is an investor in the company. ARK Invest recently bought 3800 shares of Skillz (NYSE:SKLZ) for its famous ARK Innovation Fund. The fund also defended the company and said that based on its research, it believes the latest claims around revenue recognition practices and leadership of Skillz are exaggerated or incorrect. For context, the brother of Skillz (NYSE:SKLZ)’s founder recently accused CEO Andrew Paradise of a scheme to take over his brother’s 5% stake of the company.
8. Playtika Holding Corp. (NASDAQ: PLTK)
Playtika Holding Corp. (NASDAQ: PLTK) is the brain behind the Playtika Boost Platform that offers live game operations services. The U.S-based company is also has a proprietary technology that supports a portfolio of several games. Currently, Playtika has 15 games in its portfolio, including both casual and casino-themed games.
The company beat its Q4 GAAP EPS by $0.03 and reported a more than 17.5% growth in revenue to $573.5 million, beating its projection by $21.85 million.
Playtika Holding Corp. (NASDAQ: PLTK) has also enjoyed positive ratings and commentary from several analysts, including Stifel (Buy), Goldman Sachs (Buy), Credit Suisse (Outperform), Baird (Outperform), and Morgan Stanley (Overweight).
7. Zynga Inc. (NASDAQ: ZNGA)
Zynga Inc. (NASDAQ: ZNGA) is a U.S developer of social media games. It ranks 7th in our list of best video game stocks to invest in now.
BMO analyst Gerrick Johnson rated the stock as “Outperform” and gave a price target of $15. According to Johnson, mobile is the fastest-growing sector in the video gaming industry. Further, the analyst says the company’s free-to-play social games are built on live services and rely on advanced data analytics that offer improved in-game monetization and advertising earning.
Zynga Inc. (NASDAQ: ZNGA) has 28 million monthly unique visitors from its desktop and mobile platforms as of February 2021.
In the FY 2020, Zynga reported record adverting revenue amounting to $307 million while advertising bookings amounted to $306 million, representing an increase of 12% and 12% year over year, respectively. The company reported $763 million and $897 million in international revenue and international bookings, representing 54% and 43% increase year over year, respectively.
Zynga Inc. also announced other highlights, including the launch of Harry Potter: Puzzles and Spells, which received 4.7 average star ratings on Google Play and Apple App Store.
6. Roblox Corporation (NYSE: RBLX)
Roblox Corporation (NYSE: RBLX) is a U.S-based video game company with its headquarters in San Mateo, California. The company’s flagship project is Roblox, which was released in 2006.
Roblox announced a partnership with Hasbro that would see Roblox integrated into Hasbro toys and games. The two companies are jointly working on a new project: a wide range of Roblox-inspired Nerf blaster toys that are being touted as the most popular experience on the Roblox platform. The pack will include Arsenal, Adopt Me, Mad City, Jailbreak, Phantom Forces, and Murder Mystery 2. Following the partnership, Hasbro launched a Roblox edition of its venerable Monopoly board game and intends to launch a rebranded Roblox platform before the end of the year.
Roblox Corporation (NYSE: RBLX) recently received a “Buy” rating and a price projection of $78 by Bank of America. The bank termed the gaming company as the “cure for the common mobile investment.”
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Disclosure: None. 12 Best Video Game Stocks to Invest in Now is originally published on Insider Monkey.
