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Holiday Season to Boost Videogame Sales: 3 Solid Stocks to Buy

Ritujay Ghosh
·4 min read

The video gaming industry has found a blessing in disguise in the coronavirus pandemic that is keeping people indoors most of the time. With not many options for entertainment except for streaming videos and music online, videogames have emerged as one of the biggest beneficiaries. And if the situation continues like this, this holiday season will witness a surge in videogame sales.

According to market research firm NDP Group, COVID-19 saw video games explode in popularity, as consumers were forced to stay at home and keep themselves entertained. The holiday season has always proven to be great for retailers and videogame makers are likely to witness a record surge in sales this season.

Videogame Sales to Grow During Holiday Season

According to a new report from NPD Group, videogame consumers in the United States are expected to spend $13.4 billion on gaming equipment and software this holiday season — a 24% increase from last year.

The majority of game spending this holiday season is expected to be driven through console sales. Both Microsoft Corporation MSFT and Sony Corporation’s SNE Sony Interactive Entertainment are releasing next-generation hardware this year, the Xbox Series X and the PlayStation 5, both of which have been available to pre-order for about a month now.

The majority of the increase has been in content (the games themselves, either bought digitally or on discs), but sales of hardware (consoles and accessories) have also seen double-digit increases since the pandemic began. Consumers are buying more consoles, and those who already have consoles are buying more games to play on them.

Industry Set to Soar Higher

The report also mentions that annual U.S. consumer spending on video games could reach a new high by the end of 2020 and exceed $50 billion. According to NPD Group’s gamer segmentation report released earlier this year, there are about 244 million video game players in the United States, about 30 million more than two years ago. The average gamer is spending about 14 hours per week playing video games compared to 12 hours reported in 2018.

So far in 2020, players have spent a whopping $33.7 billion on gaming equipment, up 21% from last year and driven largely by the coronavirus pandemic, NPD Group found.

Moreover, with the recent spike in coronavirus cases, it is likely that outdoor entertainment will not resume anytime soon. Video games will thus continue to dominate the entertainment space with social distancing norms likely to continue for some more time.

Our Choices

Given this sudden surge in sales and upbeat sentiment in the video gaming industry, it makes for an opportune time to invest in gaming stocks that are sure to gain in the near term.

Activision Blizzard, Inc. ATVI is a leading developer and publisher of console, online and mobile games. The company’s Call of Duty is one of the most-popular gaming franchises globally. Its Overwatch League can be considered a pioneer of the e-sports concept.

The company’s expected earnings growth rate for the current year is 44.4%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days.  Activision Blizzard carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Electronic Arts Inc. EA is a leading developer, marketer, publisher and distributor of interactive games (video game software and content). It distributes its gaming content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through its online portals — Origin and Play4Free.

The company’s expected earnings growth rate for next year is 6.3%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. Electronic Arts holds a Zacks Rank #2.

Capcom Co., Ltd. CCOEY plans, develops, manufactures, sells and distributes consumer video games. Its operating segment consists of Digital Contents, Arcade Operations, Amusement Equipments and Other Businesses segments.

The company’s expected earnings growth rate for the current year is 29%. The Zacks Consensus Estimate for current-year earnings has improved 6% over the past 60 days. Capcom has a Zacks Rank #2.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

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Sony Corporation (SNE) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
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Capcom Co., Ltd. (CCOEY) : Free Stock Analysis Report
 
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