The vaccination drive is in full swing and the economy is finally reopening. This has made many optimistic that some of the worst pandemic-hit industries will bounce back. At the same time, the reopening is being seen as a threat to many industries such as videogame and streaming services that had cashed in on the pandemic.
However, that may not be the case given the existing high demand. Videogame sales are showing no signs of slowing down despite the reopening of outdoor entertainment joints. This huge demand for videogames culminated into yet another great quarter for the gaming industry.
Videogame Sales Soar in Q2
According to NPD Group’s Q2 2021 Games Market Dynamics: U.S., consumer spending on videogames in second-quarter 2021 increased 2% year over year to reach $14 billion. The jump comes despite many predicting that sales will fall as the economy reopens with people beginning to opt for outdoor entertainment.
Although Americans are planning holidays and footfall at outdoor entertainment joints is surging, there has been no adverse impact on the videogame industry. The number of gamers is increasing in the country and sales rose across all categories, including physical & digital full game, DLC/MTX console, cloud, mobile, portable, PC and VR platforms.
Spending on content grew 2% in the second quarter, reaching $12.57 billion. Hardware sales grew 12% year over year. The only section that saw a decline was accessories, wherein sales fell 11%.
Also, spending on mobile games grew5% year over year in the second quarter, according to data from Sensor Towers.
Videogame Market Shows Promise
The videogame market looks promising as of now as sales have been on the rise every month since the COVID-19 outbreak, except for a surprise decline in April. However, the market bounced back after April, with sales growing in May and June.
According to the NPD Group, consumer spending on videogames, accessories, content and hardware jumped 5% year over year in June to $4.9 billion. June’s jump follows a 3% rise in May sales.
Moreover, new players are also foraying into the videogame market given the potential it holds.
Netflix, Inc. ( NFLX Quick Quote NFLX - Free Report) announced on Jul 20 that it would be foraying into the gaming market, as subscriber growth declined last quarter. This will only intensify competition in the coming days as the streaming giant will be providing ad-free videogame services for mobile devices to its existing customers for free.
In fact, sales are far higher than the pre-pandemic and pandemic levels and the momentum is likely to stay so. According to Newzoo, global videogame revenues could reach $189.3 billion in 2021, taking the total number of gamers to 2.8 billion worldwide.
Stocks to Watch
COVID-19 cases are once again on the rise and the government is on alert. It won’t come as a surprise if people once again postpone their travel plans and stay confined to their homes. So, videogame sales don’t look to slow down anytime soon. This thus makes an opportune time to invest in gaming stocks that are sure to benefit in the near term.
Sony Corporation ( SONY Quick Quote SONY - Free Report) 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. Following the success of its PlayStation 5, the company is more focused on product improvement. Given the huge size of PS5, Sony recently launched a lighter version called Digital Edition, which has been a hit with gamers.
The company’s expected earnings growth rate for next year is 17.6%. Its shares have gained 1% in the past 30 days. Sony has a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Electronic Arts Inc. ( EA Quick Quote EA - Free Report) is a leading developer, marketer, publisher and distributor of interactive games (video game software and content). It distributes gaming content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through its online portals. The company last month announced that it will buy mobile studio Playdemic from Walt Disney Company’s ( DIS Quick Quote DIS - Free Report) Warner Media for $1.4 billion in an all-cash deal. The videogame maker also will soon release the remake of horror classic Dead Spacefor PlayStation 5, Xbox Series X|S and PC.
The company’s expected earnings growth rate for the current year is 12%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. Electronic Arts has a Zacks Rank #2 (Buy).
Microsoft Corporation ( MSFT Quick Quote MSFT - Free Report) is one of the leading videogame makers and manufacturers of hardware and accessories. The company acquired videogame maker ZeniMax Media in December 2020 for $7.5 billion and rolled out its most successful Xbox Cloud Gaming service to iPhones, iPads and PCs in April. It will launch Microsoft Flight Simulator on Xbox Series X and Xbox Series S a year after its PC debut.
The company’s expected earnings growth rate for the current year is 35.4%. The company’s shares have gained 8.9% in the past 30 days. Microsoft carries a Zacks Rank #3.