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4 Stocks to Watch in a Thriving Videogame Industry

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The dream run for the videogame industry continues, with sales jumping for the fifth straight month. Consumer spending on games has been on the rise ever since the coronavirus outbreak. Despite predictions of a slow down with the opening of other entertainment sources, the industry has continued to flourish.

The gaming market was already doing great and the pandemic gave it a further push making it one of the most profitable industries during this period.

Videogame Sales Rise in September

According to the latest report by the NPD Group, videogame sales rose 3% on a year-over-year basis, hitting a September record of $4.4 billion. Spending on hardware soared 49% year over year.

Experts had predicted spending on gaming to slow down this year as other entertainment joints reopen. However, that hasn’t affected the gaming industry much. On a year-to-date basis, consumer spending across content, hardware and accessories reached $42.3 billion, increasing 12% over the same period in 2020.

This shows the underlying strength in the industry. Spending on content increased 10% on a year-to-datebasis to $37.1 billion, while that on hardware jumped 49% to $3.4 billion.

Industry Poised to Grow

The top videogame makers once again excelled in September. According to the report, Sony Corporation’s (SONY - Free Report) PlayStation 5 was the best-seller in terms of dollar sales as well as the best-selling hardware platform. On a year-to-date basis, Nintendo Co.’s (NTDOY - Free Report) Switch sold the maximum number of units — a spot it held on to for the 33rd straight month.

The pandemic gave a massive boost to the videogame industry, with people shelling out millions on content, hardware and accessories, as they were left with no other choice but to stay at home. This year has been equally good, with sales rising every month, except for a surprise decline in April. September’s jump is the fifth straight month of increase and the picture is likely to remain rosy in the coming days, too, with the pandemic far from over.

Also, the market leaders released some attractive titles last year and this year alongside the launch of new consoles. NPD Group’s Q2 2021 Games Market Dynamics: U.S. shows that spending on videogames in the second quarter of 2021 increased 2% year over year to reach $14 billion. The third quarter too is expected to be equally good given that sales have jumped in all the months now.

Stocks in Focus

This makes it an opportune time to track the booming videogame industry. Below are some 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 8.5%. The Zacks Consensus Estimate for current-year earnings improved 0.1% 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.

Electronic Arts, Inc. (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’s expected earnings growth rate for the current year is 16.2%. The Zacks Consensus Estimate for current-year earnings improved 0.6% over the past 60 days.Electronic Arts has a Zacks Rank #2. 

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 17%. The Zacks Consensus Estimate for current-year earnings improved 1.9% over the past 60 days.  Sony has a Zacks Rank #3 (Hold).

Activision Blizzard, Inc. (ATVI - Free Report) 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 11.2%. The Zacks Consensus Estimate for current-year earnings improved 1% over the past 60 days. Activision Blizzardcarries a Zacks Rank #3.