Will These Video Game Stocks Bring Gains To Your Portfolio?
The price action of GameStop (NYSE: GME) stock may have come back in full swing this week. While it may be tempting, there are other video game stocks that have stronger fundamentals. Video games are one of the most popular pastimes worldwide. Gamers in the United States clock in an average of 6.76 hours a week indulging in their favorite games. And as that trend continues to play out, top video game stocks are well-positioned to bring good returns to their shareholders.
Of course, video game stocks have a multi-year industry tailwind. U.S. consumers have spent over $57 billion on gaming materials and hardware in 2020. That's an increase of 27% compared to the previous year. With social distancing and restricted movement still ongoing, video games also served as a means to socialize with friends and build new social connections. In fact, according to consulting firm Deloitte, 33% of gamers reported that gaming helped them cope with the ongoing COVID-19 pandemic.
Such numbers and impact show that the gaming culture will continue to grow and impact our society. Be it from a short-term trading or long-term investing perspective, the gaming industry is one attractive sector to keep an eye out for. That said, will budding investors be putting down their controllers and invest in a video game stock in the stock market today?
Top Video Game Stocks To Watch
- Activision Blizzard Inc. (NASDAQ: ATVI)
- Microsoft Corporation (NASDAQ: MSFT)
- Zynga Inc (NASDAQ: ZNGA)
- Roblox Corporation (NYSE: RBLX)
Activision Blizzard Inc. (ATVI)
It was pretty obvious that gaming giant Activision Blizzard (ATVI) benefited greatly throughout the COVID-19 pandemic. Net bookings increased by 12.7% year over year to $3.05 billion. Meanwhile, its digital channels also saw an increase of 24.5% year over year to $2.34 billion. This reflected greatly in ATVI stock price, which has risen by over 50% in the past year.
Although things are looking up for Activision Blizzard, the company cannot continue to rely on the pandemic wave in the long run. ATVI stock has taken a breather in the past month, falling by over 11% from its peak. Of course, the recent weakness has also affected many tech stocks besides Activision Blizzard.
If Activision Blizzard's past history were of any indication, the company will introduce its yearly lineup of game franchises and remakes in an attempt to boost sales. Not only is the company working on a new Call of Duty sequel ready for the holiday season. Its recent remake of Diablo 2 also garnered rave reception among fans and gamers. Will this be enough to sustain the growth of ATVI stock? Only time will tell.
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Microsoft Corporation (MSFT)
Tech giant Microsoft has also diversified into the video game industry for some time. Recall that it introduced its own Xbox console to compete against Sony in the early 2000s. Microsoft also began to look at game development verticals, bagging Bethesda game publisher in a $7.5 billion deal with Zenimax. Such smart acquisition means that Microsoft can lock some Betheda's current and future games as exclusives. And that could increase profit for its gaming division.
Powered by its gaming verticals, Microsoft is able to weather the impact of coronavirus and offset slower sales of enterprise software. The post-pandemic recovery should see a rebound in Microsoft's current line of non-gaming products, driving its growth in 2021 and 2022.
Moving forward, we will see a lot of big title games being locked behind Microsoft's exclusivity. As a result, a lot of AAA games will be available through Microsoft's console or Windows Games Distribution. While this may spell a nightmare for gamers looking for variety, it will definitely benefit Microsoft in the long run. With Microsoft looking to thrive in the gaming industry in the near future, will this be enough for you to consider MSFT stock?
Zynga Inc (ZNGA)
While "ALL IN" may be the first thing that comes to mind thinking about Zynga Inc's mobile poker games, investors are a little bit pessimistic in doing so. Zynga stock is down by over 18% since its peak in mid-February. This came as investors rotate away from stay-at-home stocks into epicenter stocks.
As mounting liabilities are making investors nervous in putting their chips on Zynga's table, the company is definitely spending it on their future in the long run. Banking on cross-platform gaming, Zynga acquired Echtra Games earlier this month. With cooperative games being the rave among mobile gamers thanks to the gaming frenzy created by "Among Us", Zynga is looking to create a similar sensation in their current and future titles.
Some may say that there is an interesting dichotomy in Zynga right now. On one end it is making smart moves, capitalizing on gaming trends in creating future values in the company. On the other end, its massive debt thanks to the mass acquiring of gaming companies may put off some investors. Would you place your bet on ZNGA stock, or fold?
Roblox Corporation (RBLX)
Roblox, the household game for children and teenagers is the current talk of the town. This came after its debut on the New York Stock Exchange yesterday. Originally released in 2004, the game saw a massive influx of players during last year's lockdown with over 150 million users at the height of the pandemic.
RBLX stock began trading with a debut price of $45 at 1:30 pm +0000. Reaching an intraday high of $74.83 in its debut, it closed 54.4% above its reference price at $69.50 for a market cap of $37.17 billion. The debut frenzy also sees RBLX stock being traded at a volume of over 95 million shares.
Roblox reported a net revenue of $666.2 million in 2020. According to a recent statement, the company is looking to expand its business by retaining current pre-teen users as they grow older while sourcing new content to attract a new userbase among teenagers and young adults. As RBLX stock is looking to be the hottest new stock on the NYSE, will investors bank on the hype or wait and observe its performance over time?
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