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Gaming Goes Next Level During Coronavirus: 4 Stocks to Watch

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Despite the widespread economic disruption caused by the coronavirus pandemic, the global video game industry has been thriving. With millions trapped at home for a while now, either on one’s own accord or government restrictions, gaming has rapidly emerged as the key source of recreation. This is apparent from game sales and playing time, which have increased significantly over this period.

Although most restrictions have been lifted and steps to normalize day-to-day lives are underway, the fears regarding coronavirus are far from gone. The recent spike in cases across several states only fuels apprehensions. And such a scenario is only going to persuade people to stay at home and more often than not spend time playing games.

In fact, The World Health Organization (WHO) and the video game industry have collaborated on a promotional campaign called #PlayApartTogether to encourage social distancing in an entertaining way.

Gaming Buffs Up

The pandemic provided the gaming industry a unique organic growth opportunity as new norms like social distancing boosted user engagement. Meanwhile, with restrictions being lifted, several other entertainment platforms like movie theaters and stadiums are starting to reopen. However, these will operate under stringent restrictions and are unlikely to be packed to the full. Simply put, people are more likely to entertain themselves through games over flocking to places of amusement.

The gaming industry continues to operate optimally with occasional glitches being smoothened out. This resilience can be down to the fact that the gaming companies have been almost fully operational with employees working remotely. Though development and digital releases have suffered delays, these companies have been innovative and adaptive in solving the issues.

With increasing number of players and playing time, sales and in-app purchases have also been on the rise. Notably, the global video game market is anticipated to reach a worth of $159 billion in 2020, per market researcher Newzoo. The same report estimates global esports revenues to surpass $1 billion in 2020 for the first time.

Further, enhancements to gaming hardware, bandwidth and Internet have made games more accessible across various devices and platforms. Notably, mobile gaming makes up almost 48% of the industry’s revenues.

Most gaming giants have adapted to the situation well, making the most of it. Nintendo Co., Ltd.’s popular products — Nintendo Switch and Switch Lite consoles’ sales grew around 167% to 5.68 million units in first-quarter fiscal 2021. The company also sold 22.4 million copies of its popular game Animal Crossing: New Horizons during the quarter.

Capcom Co., Ltd. witnessed robust digital sales growth in first-quarter fiscal 2020 on the back of titles such as Monster Hunter World: Iceborne, Resident Evil 3 and Resident Evil 2.

With more people playing games than ever, Take-Two Interactive Software, Inc. (TTWO - Free Report) hiked its fiscal 2021 adjusted sales forecast on robust demand for its franchises, Grand Theft Auto and NBA 2K. Meanwhile, Tencent Holdings Limited’s year-over-year online games revenues improved 40% in second-quarter 2020.

4 Stocks to Keep an Eye On

Given the scenario of rising cases with no immediate vaccine available, people will spend time at home and play more games. So, let’s take a look a few stocks, which are benefiting from this trend.

Activision Blizzard, Inc. (ATVI - Free Report) develops and distributes content and services on video game consoles, PCs and mobile devices. The company’s second-quarter 2020 results were driven primarily by its free-to-play battle royale Call of Duty: Modern Warfare, which has reached 75 million players since its launch in March. Activision Blizzard’s other big game franchises including Overwatch and World of Warcraft and its King mobile business’ Candy Crush Saga also witnessed sequential improvement.

The Zacks Consensus Estimate for its current financial-year sales indicates an improvement of 23.1% from the year-ago period. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sony Corporation (SNE - Free Report) witnessed an improvement of 83% year over year in its game sales for PlayStation 4 in second-quarter 2020. PlayStation Plus subscriptions also increased to 44.9 million in the reported quarter. The upcoming PlayStation 5 is anticipated to be a key growth driver for the company in 2020.

This company, which develops, produces and sells electronic equipment and software titles, carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its current financial-year sales suggests growth of 1.6% from the year-ago period.

Redwood City, CA-based Electronic Arts Inc. (EA - Free Report) , which is a developer, publisher and distributor of video games, reported a year-over-year increase of 21% in net revenues in first-quarter fiscal 2021. The company’s flagship franchises like FIFA and Madden NFL witnessed robust player additions. While FIFA 20 player acquisition expanded the user base by more than 100% year over year, Madden NFL 20 saw an increase of almost 140%. Meanwhile, Apex Legends Season 5 attained the game’s highest engagement levels since Season 1.

The stock carries a Zacks Rank #3. The Zacks Consensus Estimate for its current financial-year sales indicates an improvement of 15.3% from the year-ago period.

Microsoft Corporation’s (MSFT - Free Report) gaming revenues improved 64% year over year to $1.3 billion in fourth-quarter fiscal 2020. The company’s Xbox hardware revenues increased 49% in the quarter, with Xbox One consoles frequently sold out across the United States. Xbox Game Pass witnessed robust engagement as well.

This Zacks Rank #3 company develops, licences and supports software, devices and solutions worldwide. The Zacks Consensus Estimate for its current financial-year sales suggests growth of 8.5% from the year-ago period.

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