4 Stocks to Bank on Coronavirus-Led Gaming Surge
Video games have become a major source of entertainment for millions, especially as the coronavirus pandemic has confined people to their homes. Even though several states in the US have eased lockdowns and the economy is slowly opening up again, fear of infection - without a vaccine or a cure - will likely keep people at home for some time. So it's likely that people will turn to video games to kill time.
According to Newzo's research report, the global video game market is projected to reach $ 159.3 billion in 2020, nearly four times the box office revenue and triple the music industry revenue in 2019, which is $ 43 billion and 57 billion, respectively Billions of dollars.
In addition, technological breakthroughs have helped industry players expand the user base. The further development and availability of 5G, augmented reality, virtual reality and cloud games are improving the situation. Mordor Intelligence's report predicts that the global gaming market is projected to reach $ 256.97 billion by 2025, an annual growth rate of 9.17% between 2020 and 2025.
Video games continue to achieve great results amid the coronavirus
After an impressive performance in the first half of the year, video game sales soared again in August, which helped stocks post solid gains in space.
According to the NDP Group, $ 3.3 billion was spent on video game hardware, software and accessories in August, up 37% year over year. Year-to-date spending was $ 29.4 billion, 23% more than the same period last year.
In the hardware space, consumers were spending $ 229 million, with Nintendo's NTDOY switch being the most sought-after console. Switch also set a new record for hardware dollar sales in August, beating the previous record set by the Wii in 2008.
Looking at the top 10 video games sold, it was Electronic Arts' EA Madden NFL 21 that took first place in August, followed by EA SPORTS UFC 4 and Activision Blizzard's ATVI Call of Duty: Modern Warfare.
Notably, five of the ten best games of the month were from Nintendo. Animal Crossing, Ring Fit Adventure, Mario Kart 8: Deluxe, Super Smash Bros. Ultimate, and Paper Mario: The Origami King by Nintendo came in fifth through ninth.
The recent trend towards multi-player mobile gaming has also helped game publishers generate profits. Most of these games are free and do not require expensive game consoles or other devices. These free games come with in-game purchases that ultimately generate revenue for publishers.
Additionally, consumers are buying fewer games these days but spending more time with them. As a result, publishers have shifted the business model from a unit to recurring revenue from an active user base.
We believe the latest developments and robust initiatives to drive player engagement and provide rich experience as the gaming industry is growing rapidly will help industry players grow gaming revenue in the quarters to come.
Given this surge in sales and the positive sentiment in the video game industry, investors can take advantage of the following stocks as they are well positioned to overcome coronavirus-related headwinds due to strong fundamentals. In particular, all of these four stocks have outperformed the S&P 500 group since the start of the year.
Performance since the beginning of the year
Nintendo is expected to take advantage of the popularity of its Switch video game console. The company has sold a record 22.4 million units of Animal Crossing: New Horizons since its release in March. This makes it the best Switch launch since the device was released in 2017. Sales of Switch and Switch Lite consoles also improved significantly in 2020.
In addition, this company's partnership with Tencent TCEHY at No. 1 (Strong Buy) enables the release of Super Mario Odyssey and Mario Kart 8 Deluxe in China, the world's largest game market. This bodes well for Nintendo's prospects. The full list of today's Zacks # 1 Rank stocks can be found here.
Nintendo is reportedly working on an updated version of its Switch console and plans to ship it in 2021.
Activision Blizzard reported that nearly 75 million people have played the Call of Duty: Warzone game since it was released on March 10. Call of Duty is one of the biggest growth drivers for the company. The game has been Activision's best-selling console franchise for 10 out of 11 years.
The strong popularity of its franchises like Overwatch, King's Candy Crush, Diablo, and Hearthstone is likely to spur in-game spend, thereby boosting net bookings and the return on sales of this Zacks Rank # 2 (buy) company in the short term.
In addition, the King division benefits from the strength of popular games in the Candy Crush franchise like Candy Crush Saga and Candy Crush Friends Saga. In addition, the success of World of Warcraft Classic reflects a growing portfolio.
Electronic Arts is benefiting from solid demand for popular franchises like Apex Legends, FIFA, Madden NFL, The Sims 4, Need For Speed Heat, Star Wars Jedi: Fallen Order, and Battlefield.
New games including Star Wars: Squadrons, The Sims 4, Star Wars: Journey to Batuu Game Pack, and EA SPORTS UFC 4, as well as upcoming releases like Need for Speed: Remastered for Hot Pursuit and Medal of Honor: Above and Beyond Expected that other updates will stimulate active user growth in the upcoming holiday season and thus generate revenue gains.
Additionally, EA's recent rebranding of subscription services, which now offer users more perks and rewards, may play a pivotal role for this Zacks company, Rank 2.
Take-Two Interactive TTWO is expected to benefit from strong demand for NBA 2K20 and NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier's Civilization VI, WWE SuperCard, as well as WWE 2K20.
Games like Borderlands 3, Ancestors: The Humankind Odyssey and The Outer Worlds have further strengthened the portfolio of this Zacks Rank # 2 company.
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Activision Blizzard, Inc (ATVI): Free Stock Research Report
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