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3 Gaming Stocks That Have Gained More Than 100% in 2020

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The coronavirus pandemic and the resultant stay-at-home trend has caused the postponement or cancellation of major sporting live games and temporary closure of venues, pushing consumers to indulge in video games, online watching of e-sports and e-sports betting.

Although majority of the casinos have reopened, traffic continues to be slow. Nonetheless, with increased focus on streamlining of cost structures along with optimization of business processes, the industry on a whole has shown some resilience.

Moreover, technological breakthroughs have helped industry players expand their user base. Advancement and availability of 5G, augmented reality, virtual reality, as well as cloud gaming are making things better. All these positive factors have helped the Zacks Gaming industry grow 21.8% in the past three months compared with the S&P 500’s rally of 12.08%.

Going forward, Mordor Intelligence report cites that the worldwide gaming market is expected to hit $256.97 billion by 2025, at a CAGR of 9.1% between 2020 and 2025.

While the FDA approved Pfizer/BioNTech’s vaccine and a second one from Moderna for emergency use authorization, it could take at least a year or two for the global population to get vaccinated, thus encouraging users to spend time over gaming in 2021.

Video Gaming Providers Emerge as Winners

The coronavirus pandemic gave an organic push to video game sales, with Americans shelling out millions of dollars on videogames. The United States has 244 million video games, which has increased by 30 million over the past two years.

Per Newzoo’s research report, the global video game market is expected to reach $159.3 billion in 2020, nearly four times box-office revenues and three times music industry revenues in 2019, which totaled $43 billion and $57 billion, respectively.

Shares of Capcom (CCOEY - Free Report) have jumped 133.3% in the year-to-date period, benefiting from the spike in consumer video game sales and upbeat sentiment in the video gaming industry. The company’s operating segment consists of Digital Contents, Arcade Operations, Amusement Equipments and Other Businesses segments.

Growing popularity of titles including Resident Evil 3, Monster Hunter World: Iceborne and new game machine Ring-ni-Kakero1 -World champion carnival version are expected drive revenues in the near term.

Year-to-Date Performance

E-sports Industry Gains in 2020

The growing opportunity in e-sports has been grabbing the attention of marketers and platforms. Multiple revenue streams are connected to e-sports, including advertising, sponsorships, media rights, player spending on in-game purchases, ticket sales to live events and merchandising.

Moreover, while e-sports is currently a small part of the huge video-game industry, it is growing exponentially. Markedly, e-sports digital advertising in the United States is expected to further grow and reach $226 million by 2021 from $175 million generated in 2019, per a Statista report.

Platforms such as e-sports betting and fantasy sites have attracted significant investments, with the legalization of sports betting in several states.

Players are now able to place bets through popular iGaming applications like DraftKings (DKNG - Free Report) , Penn National Gaming (PENN - Free Report) owned Barstool, FanDuel, BetMGM, BetRivers, Fox Bet and BetMonarch.

DraftKings is the only U.S.-based vertically integrated sports betting operator, powering sports and gaming entertainment for 50 operators across more than 15 regulated U.S. and global markets.

The company’s partnerships with MansionBet (the sports betting brand of Mansion Group), Turner Sports (a subsidiary of AT&T’s WarnerMedia), sports icon Michael Jordan, the New York Giants, Chicago Cubs and Disney’s ESPN is expected to expand its reach and drive customer engagement on its platform. These partnerships bode well with the company’s aim to gain brand exposure and secure market share in the U.S. sports betting market.

Markedly, DraftKings shares have surged nearly 398.5% in the year-to-date period compared with the S&P 500’s growth of 17.1%.

iGaming Business Model a Driving Factor

Although majority of the casinos have reopened with safety protocols, gaming revenues are still slow in comparison to the pre-pandemic levels. In such a scenario, companies are surviving by focusing more on iGaming business operations to generate online gambling revenues.

Development in latest online gaming technology to drive revenues has led many companies to invest heavily in digital initiatives to improve reliability and customer services. Per the American Gaming Association, iGaming revenues have surged 224.2% to $145.3 million in August and 203.3% over the first eight months of 2020 to $923.1 million. Online gross revenues are projected to come in at $1.05 billion for full-year 2020.

Penn National Gaming is well poised to benefit from the growth opportunities in the iGaming space. The company owns and manages gaming and racing properties, and operates video gaming terminals with a focus on slot machine entertainment.

In terms of the digital platform, increased focus on the development of Barstool Sports betting app, sports books build-outs and omni-channel distribution strategy has aided the company to gain 262.8% in the year-to-date period.

Also, the company’s iCasino continues to drive revenues. Despite the pandemic and growing competition from industry peers including Wynn Resorts (WYNN - Free Report) , Caesars Entertainment (CZR - Free Report) and Las Vegas Sands, the company is optimistic about the Barstool Sports collaboration with regard to organic customer acquisition and cross-sell opportunities.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Top 10 Stocks for 2021

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