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5 Stocks to Watch as the Gaming Space Upholds Momentum

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The pandemic has massively driven demand for video games, with people increasingly playing games on televisions, gaming consoles, computers and mobile devices. Game developers are not only attracting new users/gamers every day, they are also increasing engagement for existing players by providing new tiles, levels, arenas or environments as the games require at regular intervals. While the lockdowns put the spotlight on this industry, several signs point toward continued growth even as the virus fears ease out.

Virtual Social Interaction Grabs Gamers’ Attention

Modern technologies like cloud gaming have bridged the gap between players, helping them coordinate with others across international borders and communicate with them easily. Game streaming has become a very easy mode for gamers to show off their skills and attract sponsors. In fact, Twitch and YouTube Gaming have become gamers’ favorite go-to streaming platforms.

Applications like Discord allow free voice, video and text chart, enabling gamers to find each other, coordinate, and talk while playing. Discord lets users set up a chat room, which is actually a server through which users can invite other gamers and sponsors to the room. This application is very useful for gamers playing on their computers, making communication with other players easy, and offering search functions that can help them find other gamers and add them to the room for quick communication. 

While cloud platforms and applications continue to grab gamers’ attention and make communication easy, the younger generations may even view video games as a way to communicate and spend time with friends.

Meanwhile, global events like Electronic Entertainment Expo (E3) have shifted online and now engage a diverse number of gamers from every corner of the world. In fact, gamers who would earlier avoid such conventions due to logistical costs can now attend them easily. This year, E3 had a fully virtual show, where giants like Electronic Arts, Microsoft, Nintendo, Ubisoft and others unveiled fresh content to keep gamers engaged.

New Players Entering the Gaming Industry

For an industry that estimates revenues of $175.8 billion this year and has 2.9 billion players worldwide, per a newzoo report, gaming looks like an attractive prospect for several technology giants. Additionally, several small companies are releasing games regularly on Google Play or Apple Store, some of which turn into record hits, while many barely make it through a month. New business models that support in-game micropayments help these small-scale game developers earn revenues easily. Once they are trending, many get added to the portfolio of gaming giants through mergers and buyouts.

Companies like Turtle Beach, known to manufacture top-notch video game headsets, is expanding into the game controller market. On Jun 14, at the virtual E3 conference Turtle Beach introduced its Recon Controller for Microsoft's Xbox gaming consoles and the VelocityOne Flight Simulation Control System for playing Microsoft Flight Simulator on the Xbox and Windows PCs. The product will hit the shelf this summer and its standout feature is that the controller provides easy access to gamers’ audio.

Additionally, mergers and acquisitions continue to boost the gaming space. In March, Microsoft acquired ZeniMax Media for $7.5 billion. This arrangement with the parent company of game developer Bethesda will add several games to Microsoft’s portfolio and the Fallout and Elder Scrolls series will be exclusively launched on Xbox and Microsoft’s PC. Later in April, Electronic Arts completed its $2.4-billion acquisition of Glu Mobile, turning the former into a much bigger player in the mobile gaming market.

5 Stocks to Watch

From casual mobile games to virtual reality-supported gaming consoles, technological innovation and fresh content continue to grab gamers’ attention. Video games have taken up a huge portion of people’s time of late, thanks to growth in cloud platforms and multiplayer online games, and are likely to continue boosting engagement. Hence, we have shortlisted five gaming stocks that investors can take a look at.

Playtika Holding Corp. PLTK develops mobile games and includes hits like House of Fun andSlotomania in its portfolio. The company's expected earnings growth rate for the current year is more than 100% compared with the Zacks Gamingindustry’s projected earnings growth of 31.8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 11.5% upward over the past 60 days. Playtika currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mattel, Inc. MAT is a children's entertainment company, which designs and produces toys and consumer products. It also offers an array of video games that include Hot Wheels Stunt Track Driver, NFL Football, Armor Battle and more. This Zacks Rank #2 company's expected earnings growth rate for the current year is 66.7% compared with the Zacks Toys - Games - Hobbiesindustry’s projected earnings growth of 10%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 13.9% upward over the past 60 days.

JAKKS Pacific, Inc. JAKK develops, produces, and markets toys, consumables, and electronics and related products. The company’s video game hits are Mortal Kombat andSpongeBob SquarePants: Snowball Showdown. This Zacks Rank #2 company's expected earnings growth rate for the current year is 53.5% compared with the Zacks Toys - Games - Hobbies industry’s projected earnings growth of 10%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 71.5% upward over the past 60 days.

Zynga Inc. ZNGA develops, markets, and operates social games as live services played on mobile platforms, social networking platforms and personal computers or consoles. Farmville, Mafia Wars and Merge Dragons! - are some of Zynga’s hit games.

The company's expected earnings growth rate for the current year is more than 100% compared with the Zacks Gaming industry’s projected earnings growth of 31.8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 2.5% upward over the past 60 days. Zynga currently carries a Zacks Rank #3 (Hold).

Activision Blizzard, Inc. ATVI develops and publishes interactive entertainment content and services. The company holds a well decorated portfolio of video games, with hits like Call of Duty, World of Warcraft, Diablo and more. This company that belongs to the Zacks Toys - Games - Hobbies industry has a projected earnings growth rate of 8.9% for the current year and carries a Zacks Rank #3. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3% upward over the past 60 days.

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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
 
Mattel, Inc. (MAT) : Free Stock Analysis Report
 
JAKKS Pacific, Inc. (JAKK) : Free Stock Analysis Report
 
Zynga Inc. (ZNGA) : Free Stock Analysis Report
 
Playtika Holding Corp. (PLTK) : Free Stock Analysis Report
 
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