The coronavirus pandemic has turned into a black swan event for several businesses. In fact, some companies have cynically benefited while others faced a slump. Among the winners, digital businesses have been soaring since the outbreak and interest in gaming stocks is surging. With millions stuck at home, either voluntarily or on government orders, gaming has become the key source of entertainment.
As several states in America reopen, there has been a spike in new coronavirus cases. On Jul 9, 61,067 new cases were registered. And with more spread of the virus, people are expected to stay at home and more often keep busy on online games.
Pandemic Powers Up Gaming Arena
With millions stuck at home due to lockdowns, video game companies have got free organic marketing opportunity. Even as several entertainment platforms are reopening, they have to follow several regulations to avoid resurgence in cases. In short, theaters and stadiums cannot pack audience to full capacity and have to maintain distancing norms.
However, the gaming industry has been more resilient to the pandemic. This is because most video game developers, publishers and operators have been fully operational during the slump. With employees working remotely, companies continue developing games and digital releases have been on time. In fact, productivity issues that have come up during the period could also be mitigated easily.
On the consumer front, with people all over the world still stuck at home, online gaming has witnessed a record increase in new players and gaming time. Additionally, the WHO has recommended online gaming as an activity that helps in physical distancing.
In fact, with players able to spend more time, they are splurging on in-app purchases. Per a NPD Group’s report, in the first quarter of this year, Americans spent a record $10.86 billion on video games, showing a 9% jump from the previous year. Additionally, in May 2020, game sales reached $977 million, up 52% year over year. So far this year, sales have increased 18%.
Niantic organizes Pokémon Go Fest every year, and in 2019, it sold around 300,000 tickets for parks and city plazas of Chicago, Dortmund and Yokohama. While the pandemic has made it impossible to organize events outdoor, Niantic has adapted and added new features to organize Go Fest 2020 at home. Gamers can now play for 10 hours just like the physical Go Fests in five different themes. The game will feature themes around fire, water, grass, battle and friendship, and the ticket costs $14.99 for two days.
Hence, the much-hyped Go Fest can now be played by over millions of players, earning heavy revenues for the game that crossed more than 1 billon downloads last July.
What’s more? Mergers and acquisitions are boosting this space. On Jun 4, Zynga Inc. (ZNGA - Free Report) bought Peak Games for $1.8 billion, the acquisition expands Zynga's global player base by nearly 60%. Additionally, Peak’s acquisition will help the mobile gaming giant to not only gain mobile game players outside American but also focus on social and live events that other competitors are using as a winning strategy.
Additionally, on Jul 9, Sony Corporation (SNE - Free Report) bought a $250-million stake in Epic Games. Though the 1.4% stake does not give the company exclusive distribution rights for Epic’s main titles like Fortnite, but it surely shows the company’s interest in tapping the pandemic-led boom in the gaming arena. At present, Sony is preparing for the launch of its PlayStation 5 console.
4 Stocks to Buy
With the unavailability of a vaccine immediately, it seems that people will be stuck at home for quite some time now due to the coronavirus pandemic. And the need for entertainment has fueled demand for online games. Here’re the gaming stocks to play –
Tencent Holdings Limited (TCEHY - Free Report) offers online games and social network services. The company’s expected earnings growth rate for the current year is 24.5% against the Zacks Internet - Services industry’s estimated earnings decline of 1%.
The Zacks Consensus Estimate for its current-year earnings has climbed 8.8% over the past 60 days. Tencent sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zynga Inc. develops, markets and operates social games as live services. The company’s expected earnings growth rate for the current year is more than 100% against the Zacks Gaming industry’s estimated earnings decline of 26.6%. The Zacks Consensus Estimate for its current-year earnings has climbed 11.5% over the past 60 days. Zynga carries a Zacks Rank #2 (Buy).
Activision Blizzard, Inc. (ATVI - Free Report) develops and distributes content and services on video game consoles, personal computers, and mobile devices. The company’s expected earnings growth rate for the current year is 23.1% against the Zacks Toys - Games - Hobbies industry’s estimated earnings decline of 10.8%. The Zacks Consensus Estimate for its current-year earnings has climbed nearly 3% over the past 60 days. Activision Blizzard carries a Zacks Rank #2.
DouYu International Holdings Limited (DOYU - Free Report) operates a platform on PC and mobile apps that provides interactive games and entertainment live streaming. The company’s expected earnings growth rate for the current year is more than 100% against the Zacks Gaming industry’s estimated earnings decline of 26.6%. The Zacks Consensus Estimate for its current-year earnings has climbed 59.4% over the past 60 days. DouYu carries a Zacks Rank #2.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>