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Videogame Sales Continue to Thrive: 3 Solid Stocks to Buy

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The videogame industry has grown since the pandemic struck. The industry was already thriving, and sales skyrocketed in 2020, making it one of the best years for videogame makers. However, many had predicted that the rally will come to a halt once the economy starts reopening, but that didn’t happen.

The videogame industry continued to put up a great show in 2021 as well and the momentum has continued into this year, too, with sales soaring like never before. This has also seen many companies going for acquisitions to strengthen their portfolio. Given this situation, major players like Microsoft Corporation MSFT, Sony Corporation SONY and Electronic Arts EA are likely to benefit in the near term.

Microsoft Goes for Activision Blizzard

On Jan 18, Microsoft announced that it reached a $69 billion deal to buy Activision Blizzard, Inc. ATVI. ATVI will be Microsoft’s biggest purchase ever. MSFT will pay Activision Blizzard $95 a share in cash.

Activision Blizzard is one of the most successful videogame makers with titles like Candy Crush and Call of Duty. ATVI’s popular titles will now help Microsoft to expand its portfolio and add more titles to its Xbox console.

"This acquisition will accelerate the growth in Microsoft's gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse," Microsoft said in a statement Tuesday.

Needless to say, Microsoft’s decision to acquire Activision Blizzard is in a bid to expand its gaming business.

Videogame Sales Soaring

The pandemic saw indoor entertainment replacing outdoor options since theatres, parks and other joints were closed. Videogames have since been selling like hotcakes.

According to the latest report from Entertainment Software Association and The NPD Group, U.S. videogame sales totaled $60.4 billion in 2021, jumping 8% year over year. Sales rose across all categories including, software, hardware, accessories and even subscription.

Total spending on content reached $51.7 billion in 2021, reflecting 7% year-over-year growth. Hardware spending reached $6.1 billion, increasing 14% year over year. Spending on accessories grew 2% to reach $2.7 billion.

Sales were primarily driven by the launch of new platforms and content. According to the report, higher demand saw supply crunch for Xbox and PlayStation 5 consoles almost throughout the year.

This shows the growing demand for videogame. With the pandemic far from over and the Omicron variant again compelling authorities to close down businesses, indoor entertainment will continue to thrive, and videogames are likely to maintain its dominant position.

Our Choices

The videogame industry was already thriving and the trend is continuing. Given this scenario, it would be ideal to invest in these videogame stocks.

Electronic Artsi s a leading developer, marketer, publisher and distributor of interactive games (video game software and content). EA distributes gaming content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through its online portals. Electronic Arts’ games can be played on video consoles, personal computers, mobile devices, tablets and electronic readers.

Electronic Arts’ expected earnings growth rate for the current year is 22.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. Shares of EA have gained 7.5% in the past 30 days. Currently, Electronic Arts holds a Zacks Rank 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Microsoft Corporation is one of the leading videogame makers and manufacturers of hardware and accessories. MSFT has been expanding its footprint in the industry and recently announced that it will be acquiring videogame maker ZeniMax Media.

Microsoft is a pioneer in consoles and last year its flagship Xbox turned 20 years. The other MSFT launches include Xbox 360 (2005), Xbox One (2013) and the latest Xbox Series consoles (2020).

For the current year, Microsoft’s expected earnings growth rate is 14.6%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. Shares of Microsoft have gained 8.8% in the past six months. MSFT has a Zacks Rank #2.

Sony Corporation designs, manufactures and sells several consumer and industrial electronic equipment. SONY’s product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers and computer peripherals, and telecommunication equipment.

Sony Corporation’s expected earnings growth rate for next year is 11.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. Shares of SONY have advanced 3.2% in the past three months days. Sony Corp. currently carries a Zacks Rank #2.


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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
 
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