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Videogame Industry Poised to Grow: 4 Stocks to Buy

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After an eventful 2020, the videogame industry is on fire this year too. On Feb 8, Electronic Arts, Inc (EA) said that it will buy Glu Mobile, Inc. (GLUU) in a bid to strengthen its mobile platform with an additional range of games.

This is Electronic Arts’ second acquisition in two months. That said, the overall videogame industry has been doing well, thanks to the pandemic, which has kept millions at home with no other entertainment options available.

Electronic Arts on a Buying Spree

Electronic Arts will be buying Glu Mobile for $2.4 billion. The deal is expected to close in the second quarter of the year. Electronic Arts has made an offer of $12.50 in cash per share, marking a premium of 33% to its closing price on Feb 8.

The acquisition is in a bid to bolster its gaming range and attract more female gamers through Glu Mobile’s most popular titles like Design Home, Covet Fashion, and MLB Tap Sports Baseball and Kim Kardashian: Hollywood.

That said, Electronic Arts has been on an acquisition spree. The company acquired UK-based Codemasters for $1.2 billion. The announcement comes just days after Electronic Arts raised its annual sales outlook, as it has been riding high on the success of some of its popular sports titles including FIFA 21 and Madden NFL 21.

Videogame Industry on a High

The videogame industry has been on a tear over the past one year, especially after the coronavirus outbreak. According to market research firm NPD Group, videogame sales hit $56.9 billion in 2020 in the United States, jumping 27% from the year earlier. This is also the highest sales generated ever.

Spending on hardware touched $5.3 billion, surging 35% year over year and hitting its highest level since 2011. As more people stayed at home they spent more time on the consoles or mobiles, playing games. Experts believe that sales will continue to soar in 2021 following the recent launch of next-generation console games like Xbox by Microsoft Corporation (MSFT - Free Report) and Sony Corporation’s Playstation 5. It can thus be said that videogames will continue to dominate the entertainment space at least till the time the coronaviurus vaccine proves to be effective and the fears subside. 

Our Choices

Given that the pandemic is far from over and still keeping people indoors it is likely that videogame industry will continue to perform well. This thus makes it an opportune time to invest in gaming stocks that are sure to gain in the near term.

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

The company’s expected earnings growth rate for the current year is 27.4%. The Zacks Consensus Estimate for current-year earnings has improved 9.1% over the past 30 days. Microsoft carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

The company’s expected earnings growth rate for the current year is 92.7%. The Zacks Consensus Estimate for current-year earnings has improved 28.7% over the past 60 days.  Sony has a Zacks Rank #1.

Capcom Co., Ltd. (CCOEY - Free Report) 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 43.5%. The Zacks Consensus Estimate for current-year earnings has improved 12.5% over the past 60 days.  Capcom has a Zacks Rank #2.

TakeTwo Interactive Software, Inc. (TTWO - Free Report) is a leading developer and publisher of video games. The company earns revenues from the sale of disk-based video game products, downloadable contents, subscription, micro-transactions and advertising.

The company’s expected earnings growth rate for next year is 2.4%. The Zacks Consensus Estimate for current-year earnings has improved 2.4% over the past 60 days.  TakeTwo carries a Zacks Rank #2.

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