The gaming space has stood strong through the pandemic, experiencing exponential growth as lockdowns and social-distancing measures limited people’s entertainment options. The global gaming market reached $162.32 billion last year. Major trends like the boom in women gamers, competitive gaming, cloud gaming, a shift in game payment/subscription models and cutting-edge technology (augmented reality & virtual reality) are altering the gaming landscape completely.
Even over the past few months as lockdowns eased and people somewhat returned to normal life, the gaming space maintained its solid momentum.
Momentum in Video Game Sales Strong
Per the NPD Group’s report, consumers in the United States spent $14 billion in the second quarter of 2021, with an increase in sales across PC, cloud and non-console VR content, mobile games and subscription. Gaming content purchases and subscriptions reached $12.57 billion in the quarter.
Though sales of gaming consoles, hardware, accessories have slowed down as compared to the peak of the pandemic, the holiday season holds tremendous potential. Several companies have already lined up tiles and series that will be available on newer versions of Xbox, PlayStation and Switches. For October, the Battlefield 2042, Back 4 Blood, Far Cry 6 and Marvel's Guardians of the Galaxy game releases caught the attention of gamers. Some gamers have already signed up/pre-purchased the Jurassic World Evolution 2, scheduled for release in November on PC, PS5, Xbox Series X|S, PS4, and Xbox One.
Additionally, the NPD Group reported that in August, gamers in the United States spent $4.37 billion, highlighting 7% year-over-year growth on demand for new hardware and a strong month for software.
Cloud Transforming the Gaming Space
While gaming consoles and Switch continue to remain gamers’ favorite gadgets, cloud is transforming the gaming space completely. Undeniably, the cloud is the future of gaming. This server-based gaming trend allows gamers to access the latest games from any device without having to spend as much money on hardware. The cloud platforms allow the same games to be played on phones, tablets and PCs. The only drawback here is the speed of the Internet connection, which again can be solved with the deployment of 5G.
Google’s cloud gaming platform, Stadia, allows users to instantly play video games on compatible devices. Gamers can choose to buy games directly or subscribe to Stadia Pro for $9.99 per month for a library of games where new ones are added regularly. Similarly, Nvidia offers cloud gaming service through GeForce Now on platforms like Microsoft Windows, ChromeOS, Android and iOS, which are Nvidia Shield devices. Xbox maker Microsoft Corporation MSFT has also kept up with the trend and offers Xbox Game Pass.
Per a Research and Markets forecast, the cloud gaming market is estimated to be valued at $2.3 billion in 2020 and is projected to reach $4.98 billion by 2024, at a CAGR of 16.7%.
4 Stocks to Keep an Eye on
Gaming has transitioned from a hobby to one’s favorite source of entertainment during the pandemic. Meanwhile, the rise in digitalization, increasing global online gaming competitions, surge in mobile gaming, and the introduction of cloud gaming will help the space grow further in 2021 and beyond. Hence, we have shortlisted four stocks that investors might want to keep a close watch on.
JAKKS Pacific, Inc. JAKK offers an array of video games with hits like Mortal Kombat and SpongeBob SquarePants: Snowball Showdown. The company has an expected earnings growth rate for the current year of more than 100% against the Zacks Toys - Games - Hobbies industry’s projected earnings decline of 4.4%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 80% upward over the past 60 days. JAKKS Pacific currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Microsoft, a Zacks Rank #2 company, offers cloud gaming with Xbox Game Pass Ultimate. The company’s expected earnings growth rate for the current year is 8.4% compared with the Zacks Computer - Software industry’s projected earnings growth of 1%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 3.9% upward over the past 60 days.
Electronic Arts Inc. EA offers an array of video games that can be played on PlayStation, Xbox, tablets, smartphones and PC. Madden NFL 22, a new release by the company, topped the charts while Assassin’s Creed: Valhalla climbed to the ninth position last month from 20.
The company has an expected earnings growth rate for the current year of 15.8% against the Zacks Toys - Games - Hobbies industry’s projected earnings decline of 4.4%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 80% upward over the past 60 days. Electronic Arts currently carries a Zacks Rank #3 (Hold).
Activision Blizzard, Inc. ATVI, known for its Call of Duty franchise, is set to release Diablo II: Resurrected during the holiday season this year. This Zacks Rank #3 company has an expected earnings growth rate for the current year of 10.4% against the Zacks Toys - Games - Hobbies industry’s projected earnings decline of 4.4%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 1.3% upward over the past 60 days.
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