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4 Stocks to Watch in a Thriving Videogame Industry

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The U.S. videogame industry has been doing great for quite some time. Although many had worried that that spending on videogames will slowdown as the economy reopens given that people will have more options for entertainment, that hasn’t happened.

In fact, the optimism surrounding videogame sales is likely to continue. According to the latest report by the NPD Group, videogame sales increased once again in August.

Videogame Sales Rise

According to the latest report by the NPD Group, gamers spent $4.37 billion on videogames and accessories in August, increasing 7% year over year. On a year-to-date basis, consumer spending on videogames and accessories reached $37.9 billion, marking a whopping 13% jump from a year ago.

Spending on hardware totaled $329 million, jumping 45% year over year. This was also the best August for hardware sales since 2008, when spending hit $395 million. On a year-to-date basis, spending on hardware increased 49%, reaching $3 billion.

Sony Corporation’s (SONY - Free Report) PlayStation 5 was the best-seller in terms of dollar sales. However, Nintendo Co.’s (NTDOY - Free Report) Switch was the top-selling console in August.

In terms of games, Electronic Arts Inc.’s (EA - Free Report) Madden NFL 22 was the bestselling followed by Sony’s Ghost of Tsushima and Activision Blizzard, Inc.’s (ATVI - Free Report) Call of Duty: Black Ops: Cold War.

Videogame Market Looks Promising

The videogame market holds immense potential for growth. It has been a great 2020 and 2021, with sales rising every month since the COVID-19 outbreak, except for a surprise decline in April.

Also, new players are foraying into the market which proves that the industry is flourishing. Netflix, Inc. (NFLX - Free Report) announced in July that it would be setting foot in the gaming market, as subscriber growth for the streaming giant is fast stagnating. This will only intensify competition in the market in the coming days.

Experts had thought that the market would slow down once the economy reopens but sales have been a lot higher than the pre-pandemic and pandemic levels and the momentum is likely to stay. 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. It is expected that the third quarter too will be a good one.

Stocks to Watch

The videogame industry is seeing robust sales in2021, given that the pandemic is still keeping people indoors. This makes it an opportune time to invest in gaming stocks that are sure to benefit in the near term.

Microsoft Corporation (MSFT - Free Report) is one of the leading videogame makers and manufacturers of hardware and accessories. The company has been expanding its footprint in the 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 8.4%. The Zacks Consensus Estimate for current-year earnings improved 3.8% over the past 60 days. Microsoft carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 next year is 18.5%. The Zacks Consensus Estimate for current-year earnings improved 0.9% over the past 60 days.  Sony has a Zacks Rank #3 (Hold).

Activision Blizzard, Inc. is a leading developer and publisher of console, online and mobile games. The company’s Call of Duty is one of the most-popular gaming franchises globally. Its Overwatch League can be considered a pioneer of the e-sports concept.

The company’s expected earnings growth rate for the current year is 10.4%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. Activision Blizzardcarries a Zacks Rank #3.

Electronic Arts, Inc. 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’s expected earnings growth rate for the current year is 15.8%. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the past 60 days.Electronic Arts has a Zacks Rank #3.

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