The past few months haven’t been that promising for high-profile video game stocks. Analysts have been raising questions about video gaming organizations’ ability to sustain their model. After all, the rapid rise in free-to-play Fortnite will certainly affect big gaming franchises that ask for players to pay upfront and then supplement that with digital purchases.
But, let’s admit that console games are still growing and sales of console game units increased every quarter in the United States last year. Needless to say, Microsoft Corporation MSFT and Sony Corporation SNE saw their gaming-related revenues improve last year on strong growth in XBOX Live and PS+ users.
The Goldman Sachs Group, Inc. GS added that top-notch video game stocks have more room to run. Not only the worldwide gaming market is worth around $135 billion, it is also growing at a high-single-digit pace including console, PC and mobile revenues.
To top it, esports, mobile gaming, subscription models, streaming services and significant penetration into the Chinese market will act as long-term catalysts for gaming stocks. Banking on such positives, it will be prudent to take a look at these red-hot gaming stocks that are seeing the maximum upside.
Zynga Inc. ZNGA develops, markets, and operates social games as live services in the United States and internationally. It is one of the fastest growing mobile gaming platforms in the world that garnered annual bookings of $1 billion last year.
Furthermore, Zynga is expected to launch nine games over the next two years in order to retain players and increase their engagement. By the way, the company has signed licensing deals with Game of Thrones, Harry Potter and Star Wars. Thanks to these, Zynga is positioned to be the fastest growing gaming stock and it won’t be a surprise if the likes of Apple Inc APPL take Zynga over in the near future.
Zynga currently has a Zacks Rank #2 (Buy). In the past 60 days, the company has seen six earnings estimates move north, while four moved south for the current year. The Zacks Consensus Estimate for earnings soared 23.5% in the same period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s expected earnings growth rate for the current year is 162.5%, way more than the Gaming industry’s projected rise of 12%. The company has outperformed the broader industry in the past month (+6.2% vs -5.6%).
Take-Two Interactive Software, Inc. TTWO develops, publishes, and markets interactive entertainment solutions for consumers worldwide. The company offers products under the Rockstar Games and 2K labels as well as Private Division and Social Point labels.
Take-Two Interactive recently released Red Dead Redemption 2 and it was a grand success. Take-Two Interactive was able to sell 23 million copies of the game, making it one of the most memorable launches in recent history. Market pundits believe that the game will continue to boost Take-Two’s bottom line in the near term.
Take-Two Interactive, in fact, is expanding its product pipeline with major releases like Sid Meier's Civilization VI, Gathering Storm and Ancestors: The Humankind Odyssey, which should also bode well for long-term growth.
The Zacks Rank #3 (Hold) stock has been on fire lately, with the company outperforming the broader Toys - Games - Hobbies industry in the past year (+5.8% vs +2.6%).
The company’s earnings are expected to grow at a solid 13% and 100% in the current and next quarter, respectively. Actually, the company’s expected earnings growth for the current year is 73.7%, way higher than the industry’s estimated rise of 3%.
Activision Blizzard, Inc. ATVI develops and distributes content and services on video game consoles, PC, and mobile devices. Like Red Dead Redemption 2, Activision Blizzard’s Call of Duty: Black Ops is a huge success since its launch last October. In the fourth quarter, Call of Duty significantly boosted Activision Blizzard’s monthly active users, which grew to 53 million. Activision Blizzard’s battle royal games were also some of the top games last year.
Activision Blizzard currently has a Zacks Rank #3. Shares of Activision Blizzard did underperform the broader market last year but have bounced back now. The company has outperformed the broader Toys - Games – Hobbies industry in the past month (+5.1% vs +2.7%).
Why just this year? The stock is expected to gain a healthy 16.6% next year, much higher than the broader S&P 500’s projected rise of 5.9%.
Zacks' Top 10 Stocks for 2019
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