Speculations are rife about video gaming organizations’ ability to sustain their model. This is because increase in free-to-play Fortnite will surely affect big gaming franchises that ask players to pay upfront and then supplement the amount with digital purchases.
However, sales of console game units increased in the United States last year. What’s more, Microsoft Corporation MSFT and Sony Corporation SNE saw their gaming-related revenues improve in 2018 on strong growth in XBOX Live and PS+ users. And let’s admit that top-notch video game stocks have more room to run. After all, the video gaming industry is expanding, and sales should double to $300 billion in the next decade.
In a nutshell, esports, mobile gaming, subscription models, streaming services and a significant penetration into the market in China will act as long-term catalysts for the gaming stocks. Last but not the least, new game releases this fall will surely drive the revenue stream.
For instance, Activision Blizzard, Inc. ATVI is already keeping its players glued to more content releases. Similarly, Electronic Arts Inc.’s EA upcoming Star Wars: Fallen Order (releasing Nov 15) and Take-Two Interactive Software, Inc.’s TTWO Borderlands 3 (releasing Sept. 12) should stand out and eventually sell more copies.
Market pundits are even anticipating, especially Electronic Arts’ Star Wars: Fallen Order to sell 12 to 13 million copies, way more than 9 million Star Wars: Battlefront 2 copies were able to be sold during the third quarter fiscal of 2018.
And when it comes to Take-Two Interactive Software’s Borderlands 3, analysts’ believe, it will sell nearly 9 million units. Needless to say that Take-Two is quite famously known for Grand Theft Auto franchise that has successfully sold 110 million copies since it was released in 2013. Banking on such positives, it will be prudent to take a look at these red-hot gaming stocks that are seeing the maximum upside.
Take-Two 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’s release of Red Dead Redemption 2 was a grand success. The company was able to sell 23 million copies of the game, making it one of the most memorable launches in recent times. Take-Two has expanded its product pipeline with major releases like Sid Meier's Civilization VI, and Gathering Storm.
The stock has been on tear lately with the company outperforming the broader Toys - Games - Hobbies industry so far this year (+26.8% vs +21.2%).
Actually, the company’s expected earnings growth rate for the current quarter is 57.1%, much higher than the industry’s estimated rise of 3.6%. The Zacks Consensus Estimate for current-year earnings has been revised 6.2% upward over the past 60 days.
Activision Blizzard develops and distributes content plus services on video game consoles, PCs as well as 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 fact, Activision Blizzard’s new contents Hearthstone, World of Warcraft, and Overwatch have already started to garner a positive response from players so far. And in the last reported quarter, Activision Blizzard posted revenues of 1.21 billion, beating management's guidance of $1.15 billion.
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 (+12.2% vs +6.3%).
Why just this year? The stock is expected to gain a healthy 15.4% next year, substantially above the broader S&P 500 index’s projected rise of 5.4%. The Zacks Consensus Estimate for current-year earnings has been raised 0.9% over the past 60 days.
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. Thus, Zynga is positioned to be the rapidly growing gaming stock and it won’t be a surprise if the likes of Apple Inc. AAPL overtake Zynga in the near future.
In the past 60 days, the company has seen six earnings estimates move north while one went south for the current year.
The company’s expected earnings growth rate for the current year is 187.5%, surpassing the Gaming industry’s projected rise of 5.5%. The company has outpaced the broader industry on a year-to-date basis (+55.8% vs +9.5%).
Take-Two Interactive, Activision Blizzard and Zynga have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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